OPEC VERSUS TEXAS RAGING WAR

The EIA drilling productivity report published on February 14 just confirmed that drilling in the USA is increasing in parallel to the price of Oil. Everybody was expecting it but we now have a formal third party confirmation. All evidence is indicating that an oil price over $50 is helping higher production.

The total US oil rig count is being led higher by the rebound in the Permian. The Permian rig count is currently at 301, up 169 from a low of 132 last April. As for the total oil rig count, it is up to 591, from a low of 316 last May.

At the same time, OPEC is confirming that members of the Cartel are respecting the production cut decided in Vienna last November in spite of Nigeria trying to recoup the losses created by all its internal problems (see our last blog).

Although the Texas versus OPEC price war is raging it is interesting to note that the EIA is suggesting that the Texas shale revolution will not last forever. Currently the Texas production is close to 5 million barrels a day and U.S. shale oil production has increased significantly since 2010, driven by technological improvements that have reduced drilling costs and improved drilling efficiency.

However, the Energy Information Administration is predicting tight oil production will flat line after 2026 as drillers move into less productive oil fields and wells productivity decreases. Some analysts are seeing this decline to start to occur even faster so reaching 11 million a day seems to be further reachable.

Energy independence will have to be complemented by other sources and dependency on to OPEC may remain a reality for a long time.