A CFTC report explains that open interest in long-dated NYMEX West Texas Intermediate crude oil futures continues a long-term decline.

Jessica Summers on Bloomberg:

That’s because oil extraction has become more efficient in tight oil fields compared to conventional wells and producers have more flexibility in turning on and off the taps in response to oil prices.
The increasing amount of crude coming in from tight oil in portfolios of production firms has left them with less crude to sell five or more years forward, reducing their need for long-dated futures contracts, according to the study. U.S. weekly production has skyrocketed to 11 million barrels a day, the highest level on record, according to Energy Information Administration data.

6 thoughts on “Change”

  1. A ceiling at $70-$75/bbl has held well for the past several months. OPEC was talking about more production cuts over the summer, but now Trump has compelled the Saudis to ramp up instead. What choice do they have? Fracking is now profitable below $50, and deep water’s breakeven point is even lower. Any sustained rise in price is quickly met by domestic supplies.

    The big issue is reserves. It’s becoming clear that there’s more oil under the conterminous United States then anyone ever wanted to acknowledge. Only a relatively few places currently have the will to bring it to the surface, but technology and infrastructure can change that.

  2. Only a relatively few places currently have the will to bring it to the surface,

    Does not include New York State, which would solve the economic woes of upstate New York residents.

  3. Same in Illinois. Oil has been pumping downstate for over a century and a half. The geology prevented production from scaling. Now the only thing preventing it are government regulations acting as a de facto ban. Loopholes in the laws allow small conventional drillers to operate, of which there are still thousands, but with a Democrat likely to take over as governor in November most of that potential will stay in the ground.

  4. “most of that potential will stay in the ground”
    Until time passes, and prices appreciate enough, and then somebody’s principles will get stepped on.

  5. WTI (West Texas Intermediate) is limited by availability of pipeline transport right now and supplies without a pipeline commitment are trading at a pretty steep discount. More pipeline capacity will be online sometime next year.

    This is a distinct contrast with Western Canada, where B.C. and Alberta are at the point of civil war, and hope of obtaining any pipeline outlet has just been killed in the courts.

    Secondary considerations are probably going to be more important now. The holdouts like New York might find it hard to attract interest when they do change their mind. If I was looking where to drill next, I don’t think I’d find them attractive from just the standpoint of transportation and regulatory atmosphere. Look how welcoming California is.

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