US crude oil production has risen by 0.254 million barrels per day since the end of October, according to the US Energy Information Agency, despite the number...

John Robertson

PortfolioDirect

US crude oil production has risen by 0.254 million barrels per day since the end of October, according to the US Energy Information Agency, despite the number of operational drilling rigs falling by 25%. This disparity is not surprising and still consistent with a future rapid decline in production to force an adjustment to the balance of the market. The productivity of incremental wells being drilled in the USA has been rising but it could take as little as 18 months to extract 80% of the recoverable oil in a new well. The remainder of a four to six year operating life will involve relatively steady and modest production rates. The rigs most likely to be stopped are those with low production potential. The biggest production cuts are likely to come down the track as existing high productivity wells pass their prime and there are insufficient replacement new wells due to current spending cuts within the industry.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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