Original post:
This takes the idea of in situ storage, which we started to hear was happening in conjunction with pre-paids and other types of financing during that long ago summer of 2008, to the penultimate level.
Finance, at very low rates, only the drilling and then frack and complete at your discretion.
Don't look for a V-shaped cycle.
WTI $43.84 after trading as low as $42.85.
From the Wall Street Journal:
U.S. Producers Ready New Oil Wave
Even as crude plummets, energy firms are waiting to unleash more supply, capping any price gains
The ocean of oil from U.S. shale drove crude prices back toward six-year lows Friday, and American energy companies say they are poised to unleash a further flood that would keep prices from returning to lofty levels for a long time.Update:
The International Energy Agency reinforced the prospect of a prolonged slump in energy prices Friday, saying U.S. oil output was surprisingly strong in February and rapidly filling all available storage tanks. The Paris-based energy watchdog said this could lead to another sharp drop in crude prices, which fell by about 50% late last year.
The report sent oil prices tumbling around the world, with the global benchmark Brent crude falling $2.41 to $54.67 a barrel. The U.S. benchmark West Texas Intermediate lost $2.21 to settle at $44.84, less than 40 cents above a six-year low it reached in late January. Last summer, both traded well above $100.
It was only last month that the IEA said a price recovery seemed inevitable because the U.S. production boom was likely to cool. Instead, “U.S. supply so far shows precious little sign of slowing down,” the agency said Friday. “Quite to the contrary, it continues to defy expectations.”
Independent shale-oil producers have slashed their planned 2015 spending on drilling by $50 billion, compared with last year’s, but have promised to increase production by focusing on their best oil fields. Total U.S. crude oil production hit a high of 9.4 million barrels a day in the week ended March 6, according to federal data.
Now many are adopting a new strategy that will allow them to pump even more crude as soon as oil prices begin to rise. They are drilling wells but holding off on hydraulic fracturing, or forcing in water and chemicals to free oil from shale formations. The delay in the start of fracking lets companies store oil in the ground in a way that enables them to tap it unusually quickly if they wish—and flood the market again.
This strategy could put a cap on how high oil prices can rise once they are recovering, said Ed Morse, global head of commodities research at Citigroup Inc.
“We’re in slightly unexplored territory,” Mr. Morse said. “It’s an experiment—a big, big experiment.”
EOG Resources Inc., an oil producer based in Texas, is drilling about 285 wells that it won’t start finishing off until crude oil’s price rebounds to between $60 and $65 a barrel.
“When oil prices recover, EOG will be prepared to resume strong double-digit oil growth,” Chief Executive Bill Thomas said recently.
Some other big names in U.S. energy also are delaying well completions, among them Anadarko Petroleum Corp., Apache Corp., Chesapeake Energy Corp. and Continental Resources Inc. These four plus EOG pumped 312 million barrels of oil in the U.S. in 2014, or almost 10% of American crude production.
The number of wells in Texas and North Dakota that have been drilled but aren’t yet pumping is at least 3,000, RBC Capital Markets estimates. That oil still in the ground “provides a war chest that could temper fundamental price spikes in the coming year,” RBC analyst Scott Hanold wrote in a Friday note....MORE
Oil: More on In Situ Storage
