SSN (ASX) Cowboyistan and the Red Queen

And just how quickly are rigs being laid down (not counting the above). Sourced from Baker Hughes shows another 98 rigs laid down this past week

http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview

But of course we have 2 separate events - the Drilling and the Completion. As was discussed by PXD, APA and even SSN, there is a completions backlog and they can be staged in tying in production.

Feb EIA report is out
http://www.eia.gov/petroleum/drilling/
Overall new well rig production still increasing as is overall region (Bakken forecast Mar is 1,733 bopd)

And you can look at individual areas such as the Bakken, which shows the Red Queen in action with the legacy wells.
http://www.eia.gov/petroleum/drilling/pdf/bakken.pdf

This is replicated across Cowboyistan so for that reason (actual overall MTM production not yet declining) is why I'm cautious on any SUSTAINED oil price increase in the short term (i.e. this Qtr and next possibly).

If that makes sense, then this is the natural progression IMO. Storage in USA is still filling up given the recent numbers - 418MBO (not including the SPR). Cushing OK remains the main storage hub in US and stands at 42.6MBO Feb 6 - full history below.

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PETs=W_EPC0_SAX_YCUOK_MBBL&f=W

Nominal capacity at Cushing ~85MBO. EIA says "working capacity" is 71 MBO. The utilization rate has never exceeded 80% (so 67MBO) but some say its lower than that due to blending requirements and suggest 60MBO as maximum capacity

http://www.reuters.com/article/2015...-storage-limit-analysis-idUSKBN0LH0BG20150213

"Cushing is filling up at a pretty high rate and in two months, it will be full," Harry Pefanis, president and chief operating officer at Plains All American Pipeline LP said in a call with analysts last week. The firm owns nearly 20 million barrels of storage tank capacity in Cushing, more than any other company except Enbridge."

Not to say that is the end of the world as there is still ample storage elsewhere in the USA nor is this a SSN problem - but it may well be a WTI price problem (and so indirectly an issue) and be the catalyst of the retest of the low that the CFO of PXD was expecting to see. The spread between WTI and Brent may also widen.

Haven't really thought of storage being an issue before (as in USA needs certain amount of crude - whether produced domestically or imported) but I guess most everyone has take-or-pay contracts somewhere and if domestic production rose faster than contracted imports it has to be stored.

Be watching the EIA forecasts and BHI drilling rigs to see when MTM production falls (and how steep).