Crude Oil, Shale News: Latest Analysis Amid Price War - Bloomberg:
Oil prices have surged more than 75% in the U.S. this month. But don’t expect a quick rebound in supply from shale explorers.
The quick turnaround in oil markets is exposing the shale industry’s big weak spot: Lightning-fast production declines. Shale gushers turn to trickles so quickly that explorers must constantly drill new locations to sustain output.
And they haven’t been doing that. Drilling activity touched an all-time U.S. low after Covid-19 lockdowns crushed global energy demand and explorers slashed spending to survive a crash that has erased tens of thousands of jobs and pushed some companies into bankruptcy.
It’s a phenomenon that’s ultimately attributable to the very geology of shale. Just like a shaken bottle of champagne explodes when its cork is popped, a fracked shale-oil well erupts with an initial burst of supply. The froth is short-lived, however, unlike old-fashioned wells in conventional rocks that are characterized by steadier long-term production rates. To offset the decline curve, shale explorers used to keep drilling. And drilling. And drilling.
Oil prices have surged more than 75% in the U.S. this month. But don’t expect a quick rebound in supply from shale explorers.
The quick turnaround in oil markets is exposing the shale industry’s big weak spot: Lightning-fast production declines. Shale gushers turn to trickles so quickly that explorers must constantly drill new locations to sustain output.
And they haven’t been doing that. Drilling activity touched an all-time U.S. low after Covid-19 lockdowns crushed global energy demand and explorers slashed spending to survive a crash that has erased tens of thousands of jobs and pushed some companies into bankruptcy.
It’s a phenomenon that’s ultimately attributable to the very geology of shale. Just like a shaken bottle of champagne explodes when its cork is popped, a fracked shale-oil well erupts with an initial burst of supply. The froth is short-lived, however, unlike old-fashioned wells in conventional rocks that are characterized by steadier long-term production rates. To offset the decline curve, shale explorers used to keep drilling. And drilling. And drilling.
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