Fracklog and What it Means

It was reported this week that a backlog of over 4,700 wells in the US shale plays are drilled and waiting to be fracked at such time as the price raises or the operator absolutely has to complete the wells.

The industry calls the backlog of "drilled waiting to be completed" wells as fraclog. Others will refer to those wells in waited to be completed wells as their frac-ventory.

Everybody seems to be saying the same thing, more or less. When WTI hits around $60-$65 per bbl, then around 500,000 bopd will be released from newly fraced wells. Naturally, this increase does not occur overnight. The analysts estimate that a 5 month time period would be involved to increase production to that threshold.

The result is predictable. Oil will quickly drop, unless there is an external stimulus that we do not have today. The stimuli could be the freeing up of US crude to be sold on the world market, an extreme increase in demand, or a solid disruption of supply on the world market.

So, be prepared for a yo-yo effect on oil prices. Up and down and not going anywhere.

Buddy Cotten