{"id":70282,"date":"2015-03-28T07:05:11","date_gmt":"2015-03-28T11:05:11","guid":{"rendered":"http:\/\/countingpips.com\/?p=70282"},"modified":"2015-03-28T08:41:39","modified_gmt":"2015-03-28T12:41:39","slug":"fracklog-threatens-to-put-a-lid-on-oil-prices","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/03\/fracklog-threatens-to-put-a-lid-on-oil-prices\/","title":{"rendered":"Fracklog Threatens to Put a Lid on Oil Prices"},"content":{"rendered":"
March 28, 2015<\/div>
\r\n<\/div><\/div>

By WallStreetDaily.com<\/span><\/a> \"Fracklog<\/p>\n

By Tim Maverick<\/a>, Commodities Correspondent<\/em><\/p>\n

The price of oil continues hovering near six-year lows.<\/p>\n

Oil companies waiting for prices to rebound have turned to various storage methods for keeping oil \u201con ice\u201d unless prices recover.<\/p>\n

These methods included tactics such as storing oil in vast storage tanks onshore and in huge oil tankers offshore<\/a>.<\/p>\n

But, clever companies have found another place to keep the oil in storage\u2026 underground in the rocks where the oil comes from.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

Ever Heard of Fracklog?<\/h2>\n

You see, fracking, the method used to extract shale oil, is a two-step process.<\/p>\n

The first step is to drill a horizontal tunnel through the layers of shale rock. The second step is the actual fracking \u2013 blasting the rocks with water, sand, and chemicals. After that, the oil is ready to flow and become a producing well.<\/p>\n

But these days, many companies are stopping after the first stage. This unique method is called fracking backlog or fracklog. That is, wells have been drilled, but not brought into production.<\/p>\n

Harold Hamm, the CEO of Continental Resources<\/strong> (CLR<\/a>), told Bloomberg<\/em> that, under current conditions, about 85% of shale oil wells in the United States aren\u2019t being completed and are fracklogged.<\/p>\n

Energy consultancy Wood Mackenzie estimates that there are now about 3,000 such wells in the United States.<\/p>\n

In addition to storing the oil, it is a real cost-saver for the industry, as completing a shale oil well accounts for anywhere from half to three-quarters of the well\u2019s overall cost. This is a quick and easy way to cut back on capital expenditures.<\/p>\n

There is also a possibility down the road that oil service companies may lower their fees since they\u2019re receiving less work from the shale companies thanks to fracklogging.<\/p>\n

Many of the big shale producers are jumping on board the fracklog bandwagon.<\/p>\n

The largest U.S. shale producer to fracklog is EOG Resources <\/strong>(EOG<\/a>). It started 2015 with 200 uncompleted wells and announced it would \u201cintentionally delay\u201d about 85 more wells this year. Anadarko Petroleum <\/strong>(APC<\/a>) said it expects to have about 440 uncompleted wells by the year\u2019s end.<\/p>\n

Other major producers joining in on fracklog are Continental Resources, Apache <\/strong>(APA<\/a>), and Chesapeake Energy <\/strong>(CHK<\/a>).<\/p>\n

On the surface, fracklog seems like a logical move for oil producers, but the strategy may backfire.<\/p>\n

Opening up the Floodgates<\/h2>\n

Let\u2019s say oil prices rebound to the point where the companies decide to complete the wells.<\/p>\n

Estimates are that it\u2019ll take only one to three months to get the oil flowing from these now-uncompleted wells. Bloomberg Intelligence <\/em>pegs the output from these wells to be as high as three million barrels per day!<\/p>\n

This veritable flood of new oil will serve to cap any rally in the oil prices, and will likely send prices south, once again.<\/p>\n

Saudi Arabia\u2019s OPEC governor, Mohammed al-Madi, summed it up nicely when he said that oil will not see $100 per barrel any time soon, because higher prices would spur more output and prolong the ongoing oil glut.<\/p>\n

And the chase continues,<\/p>\n

Tim Maverick<\/p>\n

The post Fracklog Threatens to Put a Lid on Oil Prices<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com By Tim Maverick, Commodities Correspondent The price of oil continues hovering near six-year lows. Oil companies waiting for prices to rebound have turned to various storage methods for keeping oil \u201con ice\u201d unless prices recover. These methods included tactics such as storing oil in vast storage tanks onshore and in huge oil tankers […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-70282","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70282","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=70282"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70282\/revisions"}],"predecessor-version":[{"id":70284,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70282\/revisions\/70284"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=70282"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=70282"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=70282"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}