DUCs at rock bottom

Japanese refining scaled back in the first weeks of January to 2.86 mb/d while we expected runs to remain at 2.95 mb/d. Crude inventories rose by 3 mb, although remaining way below the 5-year average for Japan. In the US, the EIA’s drilling productivity report showed two interesting facts. First, the backlog of drilled but uncompleted wells (DUCs) has been steadily declining since the beginning of the pandemic. DUCs are now at 4.6k, from 8.5k in January 2020. as this backlog clears, US Shale producers will have to drill more to maintain the output constant. In terms of region, the Permian production in Texas recovered to pre-pandemic levels in December, above 5 mb/d. Other regions such as Eagle Ford of Bakken are still below 2019 levels.