Oil Rig Count Slide Continues | Russell T. Rudy Energy LLC
“World Oil” reports that while the oil rig count continued to drop for the 15’th straight week, the most recent decrease is relatively small at 41. Oil production and inventories continue to increase, but at a decreasing rate.
James Williams, president of WTRG Economics, observed that “While we’re still going to see declines on a weekly basis, the retreat is definitely losing steam. Eventually these declines will get smaller every week, if for no other reason than we have fewer rigs out there to stop drilling.”
In spite of budget cuts, layoffs, and fewer rigs running, the U. S. Energy Information Agency (EIA) reports that domestic oil production rose by 53,000 barrels of oil per day (bopd) to over 9.4 million, the highest weekly rate since 1983. Further, crude inventories increased by 9.6 million barrels to 458.5 last week. These factors put downward pressure on prices, but some industry observers think these trends will have to reverse in the near future.
However, Damien Courvalin, with investment banker Goldman Sachs, appears doubtful, offering that “U. S. producers are already preparing to ramp up activity later this year by successfully raising equity, reducing debt and building an uncompleted well war chest.” The latter refers to the recently adopted practice by some operators to drill and case, but not complete, an inventory of wells. This is in recognition of the fact that land acquisition, drilling and casing are typically only 30% of well costs. These wells can then be quickly completed when the operator chooses to do so in the future. Consequently some analysts question the extent, if any, of any future drops in domestic oil production rates.
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/3/20/smallest-us-oil-rig-drop-in-3-weeks-shows-retreat-losing-steam .
