• 4 minutes Is The Three Gorges Dam on the Brink of Collapse?
  • 8 minutes The Coal Industry May Never Recover From The Pandemic
  • 11 minutes China Raids Bank and Investor Accounts
  • 2 hours Sources confirm Trump to sign two new Executive orders.
  • 7 hours Why Wind is pitiful for most regions on earth
  • 6 mins CV19: New York 21% infection rate + 40% Existing T-Cell immunity = 61% = Herd Immunity ?
  • 11 hours In a Nutshell...
  • 18 hours During March, April, May the states with the highest infections/deaths were NY, NJ, Ma. . . . . Today (June) the three have the best numbers. How ? Herd immunity ?
  • 1 hour No More Love: Kanye West Breaks With Trump, Claims 2020 Run Is Not A Stunt
  • 5 hours A Real Reality Check on "Green Hydrogen"
  • 9 hours Why Oil could hit $100
  • 2 hours Better Days Are (Not) Coming: Fed Officials Suggest U.S. Recovery May Be Stalling
  • 3 days Joe Biden to black radio host, "If you don't vote for me you ain't black". That's our Democratic Party nominee ?
  • 45 mins Putin Paid Militants to Kill US Troops
  • 2 days Coronavirus hype biggest political hoax in history
Ross McCracken

Ross McCracken

Ross is an energy analyst, writer and consultant who was previously the Managing Editor of Platts Energy Economist

More Info

A Long-Term Crisis Looms For Oil

The US oil rig count continues to drop, falling by 3 to 710 for the week ending October 4, according to Baker Hughes data. It is now 18 percent down on the same week last year, a loss of 151 rigs, reflecting weaker oil prices, a steady deterioration in the global economic outlook and consequent downward revisions to forecast oil demand.

However, US shale will enter a period of dormancy rather than defeat. Shale oil’s most enduring legacy has been the introduction of a large element of price-responsive oil production. Shale producers retreat in the face of weaker market sentiment so that production responds to price changes, both up and down, over a period of about six to 12 months. Shale drillers also have a unique storage option in the form of drilled-but-uncompleted wells, which allows production capacity to remain in the wings ready to be brought on-stream if demand rises.

Automatic cost adjustment

Moreover, a pull-back in shale drilling has an immediate impact on the US oil services sector. Less drilling results in spare capacity pushing down the price of everything from fracking sand and chemicals to on-site power generation and drilling rig day rates. Inefficient rigs are laid up and less prolific shale plays are temporarily abandoned.

Just as production volumes react to lower oil prices, the cost of producing shale also falls. US shale goes into a period of dormancy from which it retains the capacity to emerge as strong as ever. The longer…




Oilprice - The No. 1 Source for Oil & Energy News