The Oversupply Myth: Why Smart Money Ignores Headlines and Follows Production Economics

What's Happening:

WTI crude closed at $60.57/barrel yesterday—third straight monthly decline. Natural gas is at $4.06/MMBtu, up 52% year-over-year. And the Permian Basin rig count has fallen to 250 active rigs, down 50 rigs since January (lowest since October 2021).

The market is screaming "oversupply." The IEA is forecasting a 4 million barrel per day surplus in 2026. OPEC+ is adding 137,000 bpd in December. Headlines are bearish.

But here's what the market is missing.

The Contrarian Truth:

The herd sees oversupply. Smart money sees falling rig counts and production growth slowing 25%.

• Permian rig count: Down 50 rigs year-to-date (ten straight weeks of declines)
• Permian production growth: Slowing 25% (250K-300K bpd in 2025 vs. 380K bpd in 2024)
• US crude stocks: Fell 6.86 million barrels this week (despite "oversupply")
• Natural gas: Up 52% YoY driven by structural LNG export demand to Europe and Asia

You can't produce oil without rigs. Lower rig counts today mean tighter supply tomorrow.

Tier-One Operators Are Crushing It:

While smaller operators cut rigs and trim budgets, tier-one operators are scaling up and dominating market share.

Enterprise Products just reported record natural gas processing in the Permian—8.1 billion cubic feet per day, up 6% year-over-year. They commissioned two new processing facilities in July and are hitting operational records across the board.

The Bottom Line:

The market is pricing in oversupply based on IEA forecasts and OPEC+ production increases. But those forecasts don't account for:

• Rig count declines (down 50 rigs YTD in the Permian)
• Slowing production growth (down 25% YoY)
• US shale maturation (the easy oil has been drilled)

What's left requires more capital, better operators, and proven reserves. And that's exactly where Iron Horse Energy Fund 1 is positioned.

The Move:

You can wait for WTI to hit $70 and pay a premium. Or you can deploy capital now, while prices are soft, and lock in proven reserves with tier-one operators who are hitting records while everyone else is cutting rigs.

Iron Horse Energy Fund 1 closes November 30th—33 days from today.

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