As oil prices have crept above $40 a barrel, some producers, including Oasis Petroleum and Pioneer Natural Resources, are activating drilled but uncompleted wells. Of course, the immediate concern is what effect these DUCs will have on U.S. production and, ultimately, on prices.
Reuters quoted Michael Wittner, global head of oil research at Societe Generale, as saying: "If the number of DUCs brought online is surprising to the upside, that means U.S. production won't decline as quickly as people expect. More output is bearish."
The gradual decline in production in the U.S. was brought about by decreased activity by domestic operators, as reflected in the declining rig counts. However, after rig counts had fallen by 2/3 over the past year, last week there was an increase (albeit small) increase in the rig count.
Rigs counts, production, DUCs, prices. They are all heavily integrated. We can't help be concerned that more active DUCs and more rigs will lead to increased production and lower prices. Feels like deja vu all over again.
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