Active Rig Count - July 1
Posted: Fri Jul 01, 2016 2:25 pm
North American active rig count was up 10 last week.
United States
> Rigs drilling for oil increased by 11 to 341, compared to the 1,609 peak in October, 2014 and 640 a year ago.
> Rigs drilling for gas decreased by 1 to 89, compared to 219 a year ago.
To stabilize U.S. production we'll need rigs drilling for oil of ~800 and rigs drilling for gas of ~300.
Canada
> Rigs drilling for oil decreased by 1 to 35, compared to 72 a year ago
> Rigs drilling for gas increased by 1 to 40, compared to 67 a year ago
Important here is that Canada will have less gas to send to the U.S. during the next winter heating season. It does get cold in Canada and they will need a higher percentage of their own gas for space heating.
You may see some headlines that tout the increase of ten rigs as adding to the oil supply "glut", but ignore them. North American oil and gas production is now on steep decline and the decline will accelerate in the 3rd quarter. There is a lag effect in production to the increase or decrease in the active rig count of about three months. The big production declines coming in Q3 are the result of the big decline in the active rig count in Q1. If the number of rigs drilling for oil and gas doubles next week, we will not see much impact on supply until late Q4. This is why oil price cycles always over-shoot the mark and the supply surplus will become a supply shortage within a few months. BTW the word "glut" is overused during oil price cycles.
After the 4th of July a "blow torch" summer is heading to the eastern half of the U.S. Keep an eye on natural gas prices as I now believe they will be much higher gas price by Q4 than any analysts expected a few months ago....
United States
> Rigs drilling for oil increased by 11 to 341, compared to the 1,609 peak in October, 2014 and 640 a year ago.
> Rigs drilling for gas decreased by 1 to 89, compared to 219 a year ago.
To stabilize U.S. production we'll need rigs drilling for oil of ~800 and rigs drilling for gas of ~300.
Canada
> Rigs drilling for oil decreased by 1 to 35, compared to 72 a year ago
> Rigs drilling for gas increased by 1 to 40, compared to 67 a year ago
Important here is that Canada will have less gas to send to the U.S. during the next winter heating season. It does get cold in Canada and they will need a higher percentage of their own gas for space heating.
You may see some headlines that tout the increase of ten rigs as adding to the oil supply "glut", but ignore them. North American oil and gas production is now on steep decline and the decline will accelerate in the 3rd quarter. There is a lag effect in production to the increase or decrease in the active rig count of about three months. The big production declines coming in Q3 are the result of the big decline in the active rig count in Q1. If the number of rigs drilling for oil and gas doubles next week, we will not see much impact on supply until late Q4. This is why oil price cycles always over-shoot the mark and the supply surplus will become a supply shortage within a few months. BTW the word "glut" is overused during oil price cycles.
After the 4th of July a "blow torch" summer is heading to the eastern half of the U.S. Keep an eye on natural gas prices as I now believe they will be much higher gas price by Q4 than any analysts expected a few months ago....