Friday, January 16, 2015

Steepest Drop in U.S. Oil Rigs Shows OPEC Prevailing

Steepest Drop in U.S. Oil Rigs Shows OPEC Prevailing

Photographer: Eddie Seal/Bloomberg
The Chevron Corp. Jack St. Malo semi-submersible drilling and production platform to... Read More
U.S. drillers have taken a record number of oil rigs out of service in the past six weeks as OPEC’s sustained production sent prices below $50 a barrel.
The oil rig count has fallen by 209 since Dec. 5, the steepest six-week decline since Baker Hughes Inc. (BHI) began tracking the data in July 1987. The count fell by 55 this week to 1,366. Horizontal rigs used in U.S. shale formations that account for virtually all of the nation’s oil production growth fell by 48, the biggest single-week decline.
Analysts including HSBC Holdings Plc say the decline shows that the Organization of Petroleum Exporting Countries is winning its fight for market share and slowing the growth that’s propelled U.S. production to the highest in at least three decades. OPEC’s decision not to curb its output amid increasing supplies from the U.S. and other countries has driven global oil prices down 58 percent since June.
“OPEC’s strategy is working, and it will be obvious in U.S. production by midyear when growth from shale plays will come to a halt,” James Williams, president of energy consulting company WTRG Economics in London, Arkansas, said by telephone today. “You can imagine the impact on any industry from a 50 percent impact on sales.”
Photographer: Brittany Sowacke/Bloomberg
U.S. drillers have taken a record number of oil rigs out of service in the past six... Read More
West Texas Intermediate for February delivery rose $2.44 to settle at $48.69 a barrel on the New York Mercantile Exchange, up 33 cents for the week, the first gain since November. Brent, the international benchmark, rose $1.71 to end the day at $50.17 on the London-based ICE Futures Europe Exchange, a weekly gain of 6 cents for the front-month contract.


“Prices are being forced toward levels that would force outright shut-ins in high-cost areas, mainly in Canada and the U.S.,” Societe Generale SA (GLE) analysts including Mark Keenan, its head of commodities research for Asia in Singapore, said in a research note Jan. 14.
The slump in oil rigs has yet to stop the unprecedented growth in U.S. oil production, which added 60,000 barrels a day in the week ended Jan. 9 to 9.19 million, Energy Information Administration data show. That’s the most in weekly data since at least 1983.
Meanwhile, projects are being canceled and budgets cut around the globe. Royal Dutch Shell Plc (RDSA) called off a $6.5 billion project in Qatar. Contract drillers Helmerich & Payne Inc. (HP) and Pioneer Energy Services Corp. (PES) lost U.S. rig contracts. Mexican oil service companies cut more than 10,000 people. Suncor Energy Inc. (SU) fired workers in Canada.

Permian Basin

The Permian Basin of Texas and New Mexico, the largest U.S. oil field, lost the most rigs this week, declining by 15 to 487, Baker Hughes data show. Rigs in Texas’s Eagle Ford formation dropped 12 to 185, and the Williston Basin, home of North Dakota’s prolific Bakken formation, declined by six to 165.
“We are seeing leading indicators of weak prices starting to drive the rebalancing that OPEC is seeking to achieve,” HSBC analysts including Gordon Gray, said in a research note Thursday.
Rigs drilling for natural gas in the U.S. dropped by 19 to 310. Inventories of the heating fuel in the lower 48 states totaled 2.853 trillion cubic feet last week, 11 percent above year-earlier levels.
Natural gas for February delivery dropped 3.1 cents to $3.127 per million British thermal units on the Nymex, down 29 percent in the past year.
To contact the reporter on this story: Lynn Doan in San Francisco at
To contact the editors responsible for this story: David Marino at Richard Stubbe, Stephen Cunningham

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