Peak Inaccuracy
Some of us saw this coming 1Q2025; well productivity was falling, in spite of longer laterals being drilled in both sub-basins, the Midland and the Delaware. Those longer laterals had higher IPs and were holding up pretty well for six, eight months before the decline kicked in. Longer laterals decline faster (82% the first 30 months) and have lower EURs. The last of the DUC's were getting drilled; it was impressive but not going to last. There are 57,000 HZ wells drilled in the Permian, many on spacing as close together as 500 feet; the room for three-and four-mile laterals is very limited. Go to a GIS map, use the scales and you can see that, bigger than daylight.
We said here on oilystuff.com that 4Q25 was going to start showing Permian decline. The time it takes from rig count publications and spudding a well to the first reported production for that well from the corresponding State regulatory agency generally takes six to eight months. Falling liquids productivity was not going to show up until later in the year.
The Energy Inaccuracy Agency, however, kept touting greater "efficiencies" and growth all thru 2025 and into 2026. It put those imaginary barrels into imaginary inventory, which went up and up and oil prices went down and down accordingly. Mission accomplished. The EIA's boss was pleased.
US crude stocks fell by 3.455 million barrels in the week ended January 30, 2026, the most since October and more than market expectations for a 2 million-barrel draw.
Crude stocks at the Cushing, Oklahoma, delivery hub decreased by 743 thousand barrels in the week.
Distillate stockpiles, which include diesel and heating oil, tumbled 5.553 million barrels, the most since 2021
Well, guess what? Production started dropping in October of 2025 and crude oil inventories fell thru the floor at a disproportionate rate. Some 6 MM BO sort of just... disappeared as the EIA's accounting mess had to get fixed. So down went inventories and up went prices, by $8 a barrel. The Boss is pissed. Snatching Maduro from Venezuela didn't work. OPEC is maxed out.
It's a midterm year, they'll have to get this sorted out, the EIA. $65 is way too high for a fella who wants oil below $30.
So, what's next?
Does Iowa have Wolfcamp under it?
Everyone has been waiting for this. I expect crude inventories to go through the floor and the price to zoom up. We've hit peak shale. $90/barrel oil coming. Trump listened to the CEOs of Exxon and Chevron a little too long. Time for reality, even for Trump. Last year the US drilled 15,000 wells, 11,700 of them horizontal. How long can that keep up? We are in the Red Queen syndrome, and we are losing.