Of course shutin wells will come back on when cash flow positive. They were shut in because they were cash flow negative. So what they heck does anyone expect when they go cash flow positive. DUH! Same, applies at a modestly higher price for DUCs. And then a higher yet price for new drilling.
Somehow the media and the peak oilers and the shale haters all think shale will "learn a lesson and behave" and/or that they act irrational. Instead, what we have seen several times (in the Bakken going back to 2009 downturn) is that rigs roll off if prices get too low and roll right back on if they prices recover. This is normal. And it has had the effect of reducing the long term equilibrium from 100ish to 50ish.
In the near term, the massive inventory, shut in capacity, etc. will mean that we take a long time to get back to the 50s (2028 is what the betting markets say). And it's not even just shale. It's other countries that have shut in production.
So yes, if you expected $100 oil, and that people would not restart wells before then (as the article seems to), than you will be disappointed!
Wow, wow, wow. Thank you. We are on the same page on this issue.
What struck me about the headline above: this is bad, bad news for Saudi Arabia. For US shale, it is just as you describe it. But for Saudi Arabia, that kingdom cannot survive on $30-oil.
Of course shutin wells will come back on when cash flow positive. They were shut in because they were cash flow negative. So what they heck does anyone expect when they go cash flow positive. DUH! Same, applies at a modestly higher price for DUCs. And then a higher yet price for new drilling.
ReplyDeleteSomehow the media and the peak oilers and the shale haters all think shale will "learn a lesson and behave" and/or that they act irrational. Instead, what we have seen several times (in the Bakken going back to 2009 downturn) is that rigs roll off if prices get too low and roll right back on if they prices recover. This is normal. And it has had the effect of reducing the long term equilibrium from 100ish to 50ish.
In the near term, the massive inventory, shut in capacity, etc. will mean that we take a long time to get back to the 50s (2028 is what the betting markets say). And it's not even just shale. It's other countries that have shut in production.
So yes, if you expected $100 oil, and that people would not restart wells before then (as the article seems to), than you will be disappointed!
Wow, wow, wow. Thank you. We are on the same page on this issue.
DeleteWhat struck me about the headline above: this is bad, bad news for Saudi Arabia. For US shale, it is just as you describe it. But for Saudi Arabia, that kingdom cannot survive on $30-oil.