Rig Decline Continues | Russell T. Rudy Energy LLC
As Yogi Berra said, “This is like déjà vu all over again.” The U. S. oil rig count dropped for the 16’th straight week, but production and inventory levels continued to climb, according to a recent article in “World Oil”.
The Baker Hughes oil rig count dropped by another 12 last week to 813, the lowest level in over 5 years. With the rig count roughly half of what it was last October, one would think production would drop. However, according to the Energy Information Administration (EIA), oil output rose to 9.42 million barrels per day (bpd) last week to the highest level in more than three decades.
This increase in production drove oil inventories to 466.7 million barrels last week, the highest level since 1982 according to EIA statistics.
Rising production rates and inventories will continue to exert downward pressure on oil prices in the absence of a marked increase in demand. However, demand remains stagnant. In fact, it looks as though things could only get worse. According to investment bank Goldman Sachs, the U. S. is still running enough rigs to increase oil production another 160,000 bpd by the fourth quarter of this year. OPEC in general, and Saudi Arabia in particular, are exacerbating the oil glut by increasing their production. The Saudis are currently producing approximately 10 million bpd, close to their record level in 2013.
According to Dana Benner, a research analyst with AltaCorp Capital, “We are probably six to ten weeks away from seeing the U. S. rig counts bottom and it may stay there for awhile.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/3/27/us-oil-rigs-drop-for-16th-straight-week-baker-hughes-says .
