US Oil Market Defies Price Logic as Drilling Remains Stagnant
The US oil market is facing a puzzling phenomenon where higher prices do not necessarily lead to increased drilling activity. Brandon Myers, Head of Research and Chairman of Novi Labs, shed light on this trend during the opening day of RBN and Novi's School of Energy in Houston.
Myers pointed out that since the start of the Iran War, producers have shown limited ability to rapidly add activity due to 'rig and frac crew contracts are already set'. This means that even with higher prices, operators cannot quickly increase production by hiring more rigs or crews.
The industry's productivity gains over the past decade have allowed production output to rise even as Permian rig counts decline. Myers attributed this to faster drilling, which has accounted for significant improvements in the nation's largest oil-producing basin and a key driver of US gas growth.
However, he noted that newer buzzword trends such as lightweight proppant, AI, and surfactants are becoming 'higher-hanging fruit', with efficiency gains facing diminishing returns. The same economics apply to the Utica region, where development acceleration is contingent on drilling up the wet Marcellus window.