1. New fracked wells plunge
- The collapse of oil prices has already led to the removal of more than 150 rigs in just three weeks.
- This year, the number of newly completed wells coming online could fall to its lowest level in more than a decade at less than 9,000, according to Rystad Energy and Qz.com.
- Already, seven oil and gas companies have filed for bankruptcy in 2020, a figure that could balloon with WTI under $30 per barrel.
- U.S oil production fell by 600,000 bpd last week, evidence that the hit to output has already begun.
2. U.S. oil production already peaked
- The U.S. EIA predicted that oil production could decline by 0.5 mb/d in 2020 and potentially by 0.7 mb/d in 2021.
- But, obviously, everything depends on price. Standard Chartered estimates that the U.S. could lose 4 mb/d by the end of next year if oil prices remain at $30 per barrel.
- Either way, U.S. oil production has peaked, and it will be difficult to climb back to these levels ever again, given how much capital markets have soured on the industry.
- The EIA said that the U.S. will once again become a net petroleum importer later this year, ending a brief spell in which the U.S. was a net exporter (for the first time since 1973).
3. Permian discounts spike
- With demand dropping suddenly, refineries have had to curtail the production of refined products. That has led to oil backed up in pipelines and at the wellhead.