The volume of drilled but unproduced wells continues to build across the US to record levels, but market sentiment is mixed on whether oil prices need to continue to recover from levels now around $50/b to entice new production. As the price of oil began to slip early in Q4 2018 from the mid-$70s/b, many upstream operators projected they would begin producing their DUC inventory in early 2019. But oil has since slid to mid-2017 levels and producers’ views may have changed.
On Wednesday, front-month WTI crude futures settled at $52.36/b, up $2.58 on the day, as prices continued to climb for a recent low of $44.61/b December 27. While crude prices have trended higher, market-watchers are mixed on what will induce operators to begin producing banked wells. “You’ve got a tug of war of forces,” said Tom Petrie, head of boutique oil and gas investment bank Petrie Partners.
“The lower oil price raises some questions about whether you go ahead with completing these wells,” Petrie said. “Some companies want to get them in a producing mode; others say they won’t get an adequate return right now, so they’ll wait.”