DUCs in a Row
With WTI Crude Oil price above $65, let's take a look at some underlying fundamentals. The pandemic and its lockdown crushed demand last year, leading to a drop in U.S. crude oil production from 13.1 million barrels per day during the week of March 13, 2020 to a low of 9.7 million b/d reached in both August and the week of February 19.
Drilling activity followed the loss of demand. The top chart highlights the wells drilled (blue) and completed (orange) fell from 1,000 to below 200 per month. However, while crude prices have recovered (lower chart), drilled and completed wells have rebounded but are still below pre-COVID rates. Drilled but uncompleted wells (DUCs) have fallen recently as completions have outpaced newly drilled wells.
As the economy continues to open and expand, demand for oil will require additional drilling activity and the completion of wells that were previously uncompleted.
The data in the top chart is from the EIA and represents the oil-dominant regions of Anadarko, Bakken, Eagle Ford, Niobrara, and the Permian. Completion of a drilled well includes casing, cementing, perforating, and hydraulic fracturing.