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Active Rig Count - October 30
Posted: Fri Oct 30, 2015 12:24 pm
by dan_s
The number of active drilling rigs in the United States continues to fall, dropping by another 12.
Rigs drilling for oil dropped by 16 to 578, compared to 1,582 a year ago.
Rigs drilling for gas increased by 4 to 197, compared to 346 a year ago.
In addition to the falling active rig count, the number of wells being completed is dropping even faster. WE ARE GOING TO SEE A SHARP DROP IN U.S. OIL PRODUCTION IN THE 4TH QTR.
Re: Active Rig Count - October 30
Posted: Fri Oct 30, 2015 1:05 pm
by dan_s
In November we should see bullish crude oil storage reports on Wednesdays and continuing declines in the active rig count each Friday. If this happens, it will be a bullish pattern for oil prices.
The refiners have completed their Shoulder Season maintenance programs and they are now ramping production of home heating oil. Most of the upstream companies are releasing more rigs. I except the number of rigs drilling for oil to drop below 500 by year-end. It takes 1,000 rigs drilling for oil just to hold production flat.
A lot of the U.S. natural gas supply is "associated gas" that comes from oil wells. With fewer and fewer shale wells being completed, gas production is also on decline, which is reflected in the EIA's Drilling Productivity Report. EIA now says gas production is declining by 250 MMcf per day per month. I am expecting the rate of decline for both oil and gas production to accelerate in the 4th quarter. For more on this, see the most recent presentation on the RRC website.
Weather has a MAJOR impact on natural gas demand in the United States. A Super El Nino will have a big impact on this year's winter. El Nino winters start off warm, but then turn cold and wet by mid-December with colder than normal winters in Texas and the SE quarter of the U.S. Previous Super El Nino winters have dragged on into April. A very high percentage of homes heat with natural gas in this part of the country.