As oil prices have crept above $40 a barrel, some
producers, including Oasis Petroleum and Pioneer Natural Resources,
are activating drilled but uncompleted wells. Of course, the
immediate concern is what effect these DUCs will have on U.S.
production and, ultimately, on prices.
Reuters quoted Michael Wittner, global head of oil research at
Societe Generale, as saying: "If the number of DUCs brought
online is surprising to the upside, that means U.S. production
won't decline as quickly as people expect. More output is
bearish."
The gradual decline in production in the U.S. was brought about
by decreased activity by domestic operators, as reflected in the
declining rig counts. However, after rig counts had fallen by
2/3 over the past year, last week there was an increase (albeit small)
increase in the rig count.
