(Bloomberg) — The rally in crude oil is reviving the U.S. shale boom, threatening speculators who are the most bullish on prices since July.
Money managers increased their net-long position in West Texas Intermediate crude by 3.9% in the seven days ended May 5, U.S. Commodity Futures Trading Commission data show. That’s a level last seen toward the start of last year’s price crash. Short positions declined to the lowest this year.
A 37% rebound in WTI since March has encouraged companies, including EOG Resources Inc., to lay out plans to resume drilling. The shale boom had stalled amid a record decline in rigs seeking oil, and the government is predicting lower output this month. Any acceleration in drilling will raise concern that the U.S. supply glut could worsen.
We could soon see a second surge of production growth, EOG is a rather conservative company, so if they are willing to dip their toes back in the water, others will as well.” Stewart Glickman, an equity analyst at S&P Capital IQ in New York.
EOG, the biggest U.S. shale oil producer, said May 5 that it plans to increase drilling as soon as prices stabilize at about $65.
Shale-oil explorer Pioneer Natural Resources Co. said it’s preparing to deploy more rigs as early as July, while Carrizo Oil & Gas Inc., Devon Energy Corp. and Chesapeake Energy Corp. last week raised their full-year production outlooks.
“A lot of people piled in thinking that production is going to fall off dramatically,” said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. “But the likelihood is that more production is going to come online, not less. Things are only going to get worse.”
Oil prices increasing to $65 for an extended period may add an extra 500,000 bpd by the end of next year, according to Bloomberg Intelligence. The number of wells waiting to be hydraulically fractured, known as the fracklog, has increased as companies wait for costs to drop or prices to rise..
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