#My outlook keeps crashing june 2017 Patch#

Within a month (and I’m being conservative) these DUC wells can be completed and tied into production if the price is right. DUCs, something Katusa Research calls the “DUC Dynasty” has been created. It’s a cheap way of storing oil-in its natural surrounding-in the ground!Īs you can see from the chart of U.S. Rather than above ground storage for oil, or storing oil in massive oil tankers-the owners of the DUCs know exactly how much oil they have in inventory. DUCs represent “supply in waiting.” Think of DUCs as unconventional storage. The difference between getting $45 a barrel and $55 a barrel can make a huge difference to a producer’s bottom line. Their owners wait for oil price rallies before bringing them online. oil producers have innovated and invested so much that they’ve built up a huge number of “Drilled and UnCompleted” wells… or “DUCs” for short.ĭUCs are wells that exploration firms have drilled but haven’t taken the final step of tying them to transportation and distribution networks. The incredible growth of the US domestic oil production can be seen in the US production growth chart below. As I pointed out early this month, the fracking revolution made a downward trend in U.S. is fracking its way to massive new oil supplies and production. There will be no meaningful production cuts in Russia. Russia, one the world’s top three oil producers, is also producing at high rates. I ignore OPEC’s public attempts to make the world think its members will meaningfully curtail production. It will continue to produce at high rates. OPEC, still a huge force in the oil market, is still cheating on its quotas. The supply side of the oil picture can be summed up in three key points: With this in mind, we turn to the supply side…ĭUC Dynasty: The Wave of New Supply That Will Overwhelm Any Oil Rally In other words, I believe there is greater chance in the short term of an oil demand shock to the downside than an oil demand shock to the upside.īut in the here and now, we have tepid demand growth. A recession (which the world is due for) could cripple the demand picture. I don’t expect to see rip roaring global economic growth soon.

Global oil demand growth is inching higher – neither soaring or sinking – because the global economy is in stall speed. In preview, I expect more pain in the oil sector before we gain.

#My outlook keeps crashing june 2017 Patch#

With all that in mind, I’ll take you on a guided tour of the oil patch and we’ll reach some conclusions. My team and I have spent a lot of time on the oil sector in the past few weeks. I start paying more and more attention to my spreadsheets and financial models, with the end goal of creating “shopping lists” of premier assets I want to buy. Regular readers know that when I see dire headlines, dark sentiment, and plunging share prices, my contrarian, bargain-hunting antennae go up. When the largest independent oil producers in North America deliver the worst returns since the last oil crash in late 2014 it’s time to start paying attention. The wealth destruction has been harsh.Īdditionally, here is a table showing year-to-date losses in some of biggest and well known oil and gas producers. The chart below shows the share price performance of just a few independent oil producers in North America year to date. Well-known Williston Basin producer in North Dakota, Whiting Petroleum, which produces over 100,000 bopd is down 54% year to date.

For example, Cenovus, one of Canada’s largest oil producers is down 53% from Jan 1, 2017. Large pension funds, hedge funds, sovereign wealth funds, and index funds are suffering major losses. Crude oil has dropped 22% to $42.84 per barrel and sits at its lowest point all year.

That outlook is drastically different now. Crude had been rallying for months, and the outlook for oil stocks was improving. On February 21, 2017, the price of crude oil was $55 per barrel.