With oil prices hovering at multi-year lows, many companies are choosing to store, rather than sell their oil. In addition to conventional storage in tanks and tankers, companies are also choosing to store the oil in the ground.
Modern drilling is a two step process: first, companies drill a horizontal well, then they frack that well by shooting water, sand and chemicals down it. Without that second step, the oil doesn't flow. Right now, analysts estimate are more than 3000 wells in the US waiting to be fracked. Wyoming Oil and Gas Supervisor Mark Watson says many companies are choosing to wait until prices rebound.
“It’s basically money in the bank," he said. "Why produce the well now at $50 if you hope that oil will go up and maybe in six months or a year you can sell it for $70? They can be out there and frack these wells and get them on production in a short amount of time.”
In Wyoming and Colorado, the oil and gas conservation commissions don't keep track of how many wells are uncompleted, but in North Dakota, officials estimate there are more than 800 wells waiting to be fracked.
Nationwide, the drilled but unfracked wells could add as much as 3 million barrels a day of oil to the country’s current production of 9 million barrels a day. If a significant amount of that were to come onto the market all at once, it could serve to further dampen an oil price rebound.