The End Of US Shale Oil Is Near And The Birth Of The Supercycle

On Dec 4th, 2020, we published one of our favorite articles to date titled, "Incoming Oil Bull Market: Don't Miss The Forest For The Trees." And in the article, we talked about how COVID magnified the variables of the oil bull market, and in particular, we pointed out stalling US shale productivity gains.

Fast forwarding 2 1/2 years later, the shale treadmill decline coupled with lower shale productivity is coming to full light. One of the most obvious ways we can see this is in our production matrix.

In EIA's latest 914 report, US oil production came in at 12.483 million b/d. For January, production came in at 12.536 million b/d. On the surface, US shale oil has made a good recovery from the lows we saw in COVID when production reached ~9.75 million b/d. But what's not being said is the mix in production.

If you look at the chart above closely, you will notice that associated gas production has surpassed the previous high, while crude production remains far below.

Why is this point so important? 

Because if you look at historical data from both the Bakken and Eagle Ford, the moment associated gas production surpasses crude production meaningfully, the shale play, in essence, peaks.