Export surge and record-low U.S. shale oil backlog slow production gains

U.S. shale producers have the lowest stock of drilled-but-uncompleted wells on record, limiting their ability to move ?quickly to boost crude output and replace rapidly depleted oil inventories after exports and refinery processing jumped to plug the shortfall in supply caused by the U.S.-Israeli war ?on Iran.

Since the start of the conflict, US producers have increased their exports to Asia and Europe. Iran has effectively closed the Strait?of?Hormuz and stifled the Middle Eastern oil market. This has caused a rapid decline in U.S. oil stocks. According to data from the government, U.S. crude stocks fell by 12.4 million barrels to 806.8 millions barrels during the week ending May 22, as refinery intake and exports surged, pushing them to their lowest level since January 2025. Since the beginning of the war, stocks are down by 52 million barrels.

Shale has a short production cycle, so wells can be switched on and off very quickly. Drilled-but-uncompleted wells, known as DUCs, are among the fastest ways to raise output, with production coming online in six to nine weeks, compared with three to nine months for new wells. I anticipate that oil-focused independent operators with significant DUC inventories, will reduce them at a record rate over the next few months, said Linhua Guan. She is the CEO of Surge Energy.

U.S. energy information administration estimates that there were 4,972 DUCs last month, the lowest ever recorded in data dating back to 2013. This follows 14 consecutive months in which DUC counts declined due to completions. Last year, operators completed many previously drilled wells to reduce costs as oil prices remained low at $65 per barrel in 2025. Analysts said that while drilling and finishing a well costs between $8 and $10 million dollars, they can complete a well previously drilled for $5 to $6 million.

Matthew Bernstein is the VP for North America Oil and Gas, at consultancy 'Rystad.

Enverus, a consultancy, estimated DUCs at 3,866 in April. This was after excluding "wells" that were drilled over two years ago and which they believed are unlikely to be completed. According to Novi Labs, some drilled wells never get completed because of energy infrastructure constraints, such as limited pipeline connectivity or problems with reservoir casings and cement.

Brandon Myers is the head of Novi Labs' research. He said, "This shock-absorber is designed to cushion quarter-over quarter changes. But it's something that you cannot draw down six quarters straight without consequences." They can be used as a quick way to get production up and running. Diamondback Energy, a U.S.-based producer, raised its production forecast for 2026 and plans to reduce its DUC inventory in the second quarter. It will also add two to three additional rigs throughout the rest of the year.

According to Primary Vision, the number of crews carrying out hydraulic fracturing in the United States has risen by 21% since the beginning of the year.

The EIA raised its forecast for 2026 U.S. oil production to 13.65 million barrels per day (bpd) in May, up from the 13.51 million bpd that it projected in April.

Rystad reported that the number of DUCs, which account for almost half the U.S. oil production, fell to 540 by May from 609 before the start of the war in February.

DUC COUNT SET TO START GROWING

Analysts claim that operators are already buying more rigs as oil prices rise in the future. U.S. crude for November delivery, when new wells will start to produce, was trading at $78 per barrel on Friday. This is the level that operators need to commit to drilling.

Enverus reported a slight increase in DUCs in the past three weeks. By May 20, the count had risen to 4,100 DUCs, after having fallen as low as 4,000 DUCs.

ConocoPhillips is adding a rig to its fleet this year in order to maintain completion efficiency, said CFO Andy O'Brien during the company's earnings presentation in April. Patterson-UTI is one of the biggest U.S.?drilling contractors onshore. The company expects to have 100 active rigs by the end of 2026.

Baker Hughes reports that the U.S. oil rig count has increased for four weeks in a row, and reached 425 during the week ending May 22. This is its highest level since July 2025.

Carey Ford, CEO of Precision Drilling, said that the company is experiencing an increase in customer conversations about adding rigs this summer.

(source: Reuters)