Petrostates, beware: U.S. shale drillers are starting to ramp up production from “fracklogged” wells. As the price of oil collapsed from its June 2014 high of more than $110 per barrel down to its $28 nadir this past January, shale operators were put in the uncomfortable position of not being able to turn a profit in many of their projects. To cope, many companies drilled shale wells but didn’t “complete” them—that is, they didn’t start actually fracking and delayed real production—choosing to prepare for a rebound when prices creeped back up to more acceptable levels. The fracklog now contains more than 4,000 wells, and as Bloomberg reports, some analysts expect that it might be wiped out in the coming months:
Crude in the $40- to $50-a-barrel range may wipe out most of the fracklog in Texas’s Permian Basin and as much as 70 percent of the inventory in its Eagle Ford play by the end of 2017, according to Bloomberg Intelligence analyst Andrew Cosgrove. While bringing them online is the cheapest way of taking advantage of higher prices, the wave of new supply also threatens to kill the fragile recovery that oil and gas markets have seen so far this year. […]U.S. oil producers extended the biggest shale drilling revival since last summer as rigs targeting oil and gas in the U.S. rose by 7 to 447 last week, according to Baker Hughes Inc. Dave Lesar, chief executive officer of Halliburton Co., the world’s largest provider of hydraulic-fracturing work, said Wednesday that the market in North America has turned and that he expects a “modest uptick” in drilling in the second half of the year.
Oil prices have dipped in recent weeks down to $45 per barrel, and barring a major supply disruption, they won’t be creeping up much higher, with hundreds of thousands of barrels of oil ready to come out of American shale formations. The fracklog sets a soft cap to the oil market—if prices rise by any significant amount, those 4,000+ wells will come online and boost global supplies, which will bring prices right back down again.Petrostates have an obvious need for higher oil prices, but we’re unlikely to see $100+ per barrel oil anytime soon—American shale production stands in the way. That’s good news for consumers, and as the United States starts utilizing its fracklog, it’s good news for American energy security.