Raymond James & Associates Inc. said this week that it expects about a 100-unit decline in the overall Baker Hughes US rig count in the coming months before an oil price-driven surge commences in 2018. RJA’s revised forecast comes after several major US exploration and production firms announced reduced 2017 capital budgets and revised second-half drilling plans (OGJ Online, Aug. 14, 2017).
The financial services firm expects “a short-term rig count retracement” given the typical 15-20 weeks between a major shift in West Texas Intermediate prices and a response in rig counts. Another factor is E&P firms “substantially” outspending cash flows this year, which is unsustainable without either reduced drilling spending or higher oil prices, it said.
RJA forecasts a 2017 rig count average of 850 but expects rising oil prices over the next 6 months will drive rig activity to average 1,100 in 2018.
“While US oil production is responding to the increased activity this year, massive US inventory drawdowns leave us convinced that the global oil market is meaningfully undersupplied and will remain so until oil prices rise meaningfully from current levels,” RJA said.
“The math is simple: If oil prices don’t move higher, the US rig count falls even further next year, US oil supply growth slows, and global oil inventories fall to dangerously low levels,” it explained.
Read: http://www.ogj.com/articles/2017/08/dow ... id=1843236
Active Rig Count is falling
Active Rig Count is falling
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group