Decelerating Drilling Decline? | Russell T. Rudy Energy LLC
The number of rigs targeting oil in the U. S. fell by 33 to 986 last week according to a recent article in “World Oil”. However, this was the smallest decline since the week ending January 2. The number of active oil rigs in the U. S. has dropped more than a third over the last four months, so a relatively small decrease would appear to be good news.
“ Three or four weeks ago the rig count was falling like Newton’s apple and now it’s just rolling down the hill”, James Williams, president of WTRG Economics, is quoted as saying. The recent crude price collapse has already cost thousands of jobs and eliminated over $86 billion in capital spending plans for 2015.
OPEC kept the downward pressure on prices by increasing production by 163,000 barrels of oil per day (bopd) in February. However, in spite of decreasing rig counts, domestic production climbed to 9.29 million bopd in the week ended February 20, and the U. S. Energy Information Administration predicts 9.3 million bopd by year-end. With supply continuing to grow on all fronts, prices are not likely to recover in the near future.
Consequently, Chesapeake and Continental Resources recently joined the ever growing number of operators announcing capital spending cuts for 2015. As a result of these reductions analysts at consulting firms Wood Mackenzie and Genscape predict the domestic rig count to continue its slide into the second quarter before bottoming out. Goldman Sachs predicts that eventually this will translate into production continuing to increase, but at a decreasing rate. Hopefully this will ultimately translate into a price recovery.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/3/1/us-oil-drilling-retreat-slows-as-fewest-rigs-shut-in-eight-weeks .
