The Wrap – Week Ended 6/3/16



OPEC came and went, as expected, with no change to current thoughtful-watch policy.  

U.S. Lower 48 production continues to fall as expected (30,000+ bopd) per week and is now down ~960,000 bopd from the April 2016 peak and nearly 800,000 bopd YoY. We estimate onshore Lower 48 is off 1.1 mm bopd from its March 2015 peak.

The rate of decline in U.S. oil directed drilling has slowed in 2Q16 as expected and popped by 9 last week. This is not a dire omen for oi prices, but simply an outcome of plans being set in motion to modestly increase activity in the Permian in 2H16. We don't see a tsunami of rigs or DUCs suddenly halting the decline in U.S. oil volumes. It's an aircraft carrier, not a catamaran and as it took time to rollover so too will it take time, and the application of much more capital (DUCs aren't free) to stabilize let alone restart growth.  

We note natural gas directed drilling hit a new cycle low and we expect the rig count there to ebb more modestly into and stabilize late in the second half. Counts are far below levels that will maintain volumes. 

The ZLT D was up 1.6% on the week and is up 26.1% for the year.  The XOP was up 1% on the week and is up 17.5% on the year. Our Shopping List names, latest update viewable here, are performing in line with the ZLT and underperforming rebounding names in both the oily and gassy segments that took it on the chin more through last fall and into February 2016.

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6 Responses to “The Wrap – Week Ended 6/3/16”

  1. 1
    zman Says:

    Invest 93L becomes TD 3 near Yucatan Peninsula. 

  2. 2
    zman Says:

    Upgraded to Tropical Storm Colin

    Landfall expected gulf side Florida Monday afternoon. 

  3. 3
    zman Says:

    Oil up slightly this evening


    NG up more


  4. 4
    Baylor Says:

    Re 3 is July the front month? At $2,45 I thought the frontmonth was much lower

  5. 5
    zman Says:

    re 4 – July is the front month, it rolled to July May 27th, then rallied all week. 



  6. 6
    Baylor Says:

    Thx. Been on vacation

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