More evidence that the oil super cycle is underway, oil prices are on the rise as global demand and underinvestment in new oil projects are starting to take their toll on global oil supply. There is talk of new sanctions on Iran, and Platts is reporting that Venezuela’s production hit its lowest since its oil industry was affected by a major strike that lasted from December 2002 to February 2003. Not counting strike-affected months, Venezuela production was last this low in August 1989, more than 28 years ago.

Shale oil production is sputtering as Baker Hughes (BHI) reported that oil rigs fell by 5, perhaps due to the extremely cold weather. With sharp decline rates by U.S. shale oil wells they had better keep those rigs rising and increase well completions to have a chance to even come close to the levels of oil production that the Energy Information Administration is predicting will happen.

EIA shale oil data has been brought into question by an MIT study as well as producers, because they are astounded by what the EIA is projecting. Those concerns are also being raised by shale pioneer Harold Hamm of Continental Resources (CLR) as well as BP CEO Bob Dudley. Most of the producers that I have spoken to in the shale patch agree that the EIA is missing the complexities of shale oil and the variance of different wells and formations. They also say they are giving too much emphasis on technology gains that are not happening like the EIA thinks they are.

This new super cycle in oil started to develop when oil prices crashed in 2015 and 2106. After a false start, global economies worries like the Grexit, the lifting of U.S. sanctions on Iran and worries about the Chinese economy caused a selloff of historic proportions, yet it is in the ashes of these market collapses that the biggest bull markets are born.

For anyone that would listen we were warning that shale oil production was not a replacement for trigonal oil projects. We warned that a trillion dollars in capital spending cuts would take its toll. We warned about the false ‘lower for longer” narrative.