Lower DUC Count Signals Lower US Production

February 22, 2022

Historically, there has been a strong correlation between the number of active drilling rigs and the spot price of West Texas Intermediate Oil (WTI). Since the early days of the pandemic, this correlation has weakened considerably. While there has been a steady but modest uptick in the rig count, the number of drilled but uncompleted wells (DUCs) has declined substantially over the last few years (1/2020 – 8,547; 1/2021 – 7,449; 1/2022 – 4,466). DUC counts are the lowest they have been since January 2014 (4,462). Unless the DUC count starts to reverse, oil production is expected to peak and then start to decline rapidly as existing wells deplete themselves. It should also be noted that most oil companies complete high grade wells. That is, they complete the wells that they deem to be most productive. Fewer DUCs and lower quality output do not bode well for production.

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