WTI front month pricing is back above $40!!  The break is over!

The last time we were here… the world looked very different.  700+ rigs were running.  300+ frac spreads were cracking rock.  Companies had come through Q4 earnings talking about growth. But on March 9th, the world looks a lot different.

What is “price”, anyway?  Price encourages behavior.  A $2000 handbag says “exclusivity”. 3 pairs of panties for $10 says “great deal, I need more masks”. $40 oil says the following:

1. US and Canadian producers had shut in 4 mmbo/d (which as you know I strongly advocated for – for just this reason). They can now bring those wells back online. Less than 2 months, no damage, more revenue!  #winning
2. There are 7500 DUCs in the US. With stronger pricing, companies will consider completing their best inventory to backfill declines and half cycle economics at $40 (with hedging out 12 months) look better than at $20.
3. 1.5 billion barrels of over production went into storage in the last 3 months and today, the world is still producing 5 mmbo/d more oil than demanded.  Much of this “stored oil” was purchased at <$30/bbl. 33% profit to sell today? Absolutely.

All that says 4-7 mmbo/d of oil is coming back to the market. What do we know about supply-demand?

#hottakeoftheday