Energy Prospectus

February 4, 2015 U.S. Crude Oil Storage report puts pressure on oil price. As Cushing, Oklahoma storage levels rise the gap between WTI and Brent should widen.

CRUDE OIL INVENTORY/’000 bbls (Week Ended 1/30/15)

Current: 413,060
Actual Build/(Withdrawal): 6,333
Economist Average Estimate: 3,940
Previous: 406,727

Just for the record. A company's hedging program has nothing to do with the decision to drill or not drill a new well. Hedges are financial derivatives. They are paid by the counter party regardless of the production of the company. Decisions on capital costs are based on projected drilling & completion costs and future estimate production/revenues.

I have seen this comment (about hedges) before and it is just a stupid statement. You and I could have derivative in place and no production.

The reason production will continue to go up in Q1 and Q2 is because there was a bunch of wells waiting on completion at year-end. As the "inventory" dries up and the number of new wells drops, lower production is on the way. If the active rig count continues to fall - and I think it is going down to 1,000 - there is NO WAY we can drill enough new wells to offset the million that are on decline. There are currently tens of thousands of high decline rate horizontal shale wells on production. Their production drops 30% to 50% in the first year.

When U.S. production goes on decline, global production will be on decline. The U.S. accounted for 84% of production growth the last three years.

$50 oil is not enough to justify the capital expenditures required to meet this worlds growing thirst for oil.

BTW the Houston paper reported this morning that pickup and SUV sales were up 16% in January. "Buba" wanted a new pickup and with lower fuel costs he has the money to lease one. Between today and the 3rd quarter there is going to be a HUGE increase in demand for liquid fuels. See: https://www.iea.org/oilmarketreport/omrpublic/