Good morning, here's what the Oilman has for you today:

• Permian Just Got Even Hotter

• Will OPEC “Flush” the Market with More Oil?

• Upcoming Oil and Gas Events

• Tweet of the Day

Permian Just Got Even Hotter

The Permian has been a magnet for oil drillers.

It turned into an even stronger magnet after Exxon’s takeover of Pioneer.

Now, Occidental is bidding for CrownRock.

And drillers are running out of land.

A sellers’ market

Crown Rock is one of the last remaining independents in the Permian.

There is a bidding war for it, with Oxy reportedly a favorite.

The prize? A deal worth over $10 billion, according to the WSJ.

That’s a pretty penny for a company that pumps some 150,000 barrels of crude daily.

But with acquisition targets shrinking fast, a pretty penny is what buyers should be ready to pay.

It’s the Permian, after all—the place where there’s still a lot of oil to be squeezed out of the rock.

Which seems not to be the case with other shale plays.

There, production growth potential is weaker. Or drillers are lazier.

No one is lazy in the Permian

In fact, drillers there are trying new techniques to extract oil from the formation.

It’s more expensive, but it pays off if you do it right.

This, coupled with the surge in acquisition appetites, suggests something a little bit worrying.

If everyone’s looking to the Permian for future production, that’s bad.

It means the rest of the shale patch is in depletion mode.

On the bright side, it could be just another bargain race.

When prices for acreage rise enough, it will taper off.

Or buyers will start looking elsewhere for production growth.

There’s still plenty of oil and gas in the shale rocks underneath the U.S.

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Will OPEC “Flush” the Market with More Oil?

Last week, OPEC+ agreed to more production cuts.

Traders were underwhelmed.

Oil prices fell.

And now an analyst has suggested the Saudis might do a 180 and turn those taps on full.

A suicide mission

The Saudi-led cartel is pretty much out of options.

Not that it has ever had a lot of these.

Its options come down to either shrinking supply to push prices higher or flooding the market to push competitors out.

They did the latter to U.S. shale a few years ago.

It worked for a while, with prices collapsing and dragging a lot of drillers with them.

But those that survived got leaner and meaner and better at survival.

Even so, the flooding tactic will still take some under if tried now.

The problem is it will slash the oil revenues of the Saudis.

And they need these because they have very ambitious plans.

Such as the $500-billion Neom smart city project.

Yes, you read that right: $500 billion.

You can’t finance this by taking Brent down to $50 or something.

An algo-dominated market

OPEC’s drama is deeper than just a rivalry with U.S. shale.

It turns out that while they try to control the physical market, the futures market is being controlled by automated trades.

Per Bloomberg, “Algos more broadly are responsible for as much as 70% of crude trades on an average day, according to data from TD Bank and JPMorgan.”

That’s a lot. An awful lot, given that Algos are trend followers.

So, whatever the Saudis and their OPEC friends try to do in the physical market, it won’t matter much.

At least for a while, that is. Then, the futures market would catch up.

Upcoming Oil & Gas Events

• December 6: Petroleum Alliance Of Oklahoma Wildcatters Wednesday Luncheon, Oklahoma City, OK

• December 6: 15th Annual PAW Wildlife & Reclamation Conference, Casper, WY

• December 6: PIOGA Mix, Mingle & Jingle Holiday Party, Wexford, PA

• December 15: 23rd Annual KOGA Christmas Party, Bodley Bullock House, Lexington, KY

Around the Global Patch

🇻🇪 Maduro mulls invasion: Guyana's oil riches.
🇨🇦 Canada's oil and gas investments surge.
🇸🇦 Saudi Arabia's strategy: boosting oil demand.

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