$100+ oil evokes imagery of soaring oil company profitability, crowded oilfields, hiring booms, and industry growth. But now $100+ oil is a thing of the past, at least for the foreseeable future. $70 oil is the new $100 oil. In other words, $70 is a price level that should create industry euphoria (when it eventually returns).
The reason is that the US shale revolution has become a victim of its own success – first in natural gas, and now in oil. That is, we have found a way to unlock massive resource potential very quickly, too quickly in fact for price to hold up against the new volume.
With oil prices at $100+, the US independents can essentially flip a switch and produce incredible volumes of oil. As our first chart shows, the US has reversed several decades of oil production decline in just 5 short years. Industry accomplished this with 1,000 fewer rigs running. $100 oil enables the technology and activity that delivers this kind of explosive growth. This kind of explosive growth creates a supply glut that sends oil prices lower. Thus, $100+ oil should no longer be viewed as a sustainable, medium-term possibility.
Of course this realization is only true now because the OPEC put is dead. With Saudi releasing oil prices to market forces, we should now expect any return to $100+ oil to be met with a veritable tsunami of US production. Oil price upside will now be self-regulated by US unconventional oil drilling.