Long Run Explor Ltd Ord WFREF

RE:Oil Still Have Headwinds Record Production

[JohnJBond]

November data is too old to be helpful in this current oil price slide.

Yesterday, there was a significant increase in US weekly oil field production.    The prior 4 weeks had been flat, and it was looking very much like a peak - I was disappointed to see a jump reported yesterday for the week prior.

There is much talk of what it costs to produce a barrel of oil.   What is overlooked, is the difference between the cost of producing a barrel from a well prevously drilled, and tied into the pipeline, vs the cost of finding a new well from scratch.    The former is very low, whereas the latter is what is being discussed in the media.   

Low oil prices lead to maxium production from tied in wells, and minimal exploration and discovery/production of presently unknown wells.   

The question on my mind is how long will it take the Shale industry to run their current wells to the point that they noticibly start to run down.     Wells put on production on todays date 3 months ago (Oct) should be producing at 50% less today.   The oil price didn't start its problematic fall until about October, so I expect oil production was as normal in Oct.    Drilling has slowed since then.    

I understand that US oil production will peak, before it declines from reduced drilling.    I understand drilling has reduced.    The big question on my mind is the length of time it takes for production to decline after drilling has declined.............I don't know...........is it 1 month or 4?

US drilling likely started to slow significantly in Nov, and has continued since.

Winter is usually a busy drilling season - this winter likely isn't that busy.   Spring break up is dead for Northern drillers.    I suppose we'll see a decline in drilling going into break up.    Then a big drop during break up (with only the southern US drillers working), followed with an extension of that suspension through the summer until oil prices rebound.

As for demaind.

The "world awash with oil" argument started in October.    October is shoulder season, and a seasonal point when supply typically exceeds demand.    January is peak demand season.     I strongly suspect demand and supply are matched at the present time.    We wont see the data to show it for a couple of months.   

I don't have access to weekly consumption data.    Locally the price of unleaded feul has declined, but not at the same percentage seen in oil.   I like to think this means there is more room for the pirce of fuel to decline, and the increase in demand has yet to be seen.

All that being said, I sit here accumulating oil shares, particularly LRE, wondering how much longer it will take for the data to show declining US weekly oil field production, and how much longer it will take for unleaded fuel to half what it was in Sept.