One interesting phenomenon of the two-year crude oil price slump is the amount of oil that is still being produced by American shale oil companies undergoing bankruptcy. Many drillers already had large backlogs of drilled but not-yet-fracked wells when the price slump began. As much of the cost producing the oil has already been sunk, the marginal profit of continuing to operate producing wells makes sense even when in bankruptcy. Despite the rapid depletion curves for shale oil wells, overall production is holding up remarkably well considering the large cut in active drilling rigs and overall capital expenditures.  The EIA and IEA keep forecasting large cuts in US oil production. However, when the actual figures come out a couple of months later, these show that in comparison to the size of the estimated overproduction, the forecast drop in US production does not seem to be “rebalancing” the markets as rapidly as forecast.  Thus, with Chapter 11 bankruptcy protections keeping the creditors away, many oil companies find it profitable to keep already completed wells pumping.

—  Energy market observer, Tom Whipple

EIA is the US Energy Information Administration; IEA is the International Energy Agency

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