Oil Rigs Decline ... Cushing Adds Barrels

27th November 2015

The U.S. onshore rig count continued lower, down 13 this week.  Eagle Ford and Bakken oil rigs are currently holding just above 60 with the Permian at 214, shedding 12 oil rigs in November.  

Rising storage levels provide a fairly glaring sign that oil markets remain oversupplied.  To make matters worse, global oil demand growth is expected to slow from a five-year high this year of 1.8 million barrels per day to just 1.2 million barrels per day in 2016.

Lower-cost imported oil continues to deliver crude to refineries and drive LTO into Cushing storage. 

Source: EIA Data and GCA Analysis

U.S. Drilling Activity…..

The total number of active onshore rigs now stands at 714, down 1,161 (~62%) from a November 2014 high of 1,876.  Across the three major unconventional basins, the oil rig total declined to 339 (down 7 last week), with Eagle Ford and Williston down 1 and Permian down 5.  Horizontal rigs deceased by 12.

Total U.S. rig count (including the GOM) declined 13 last week, with rigs targeting oil decreasing by 9 for a 13-week total decline of 119.

At WTI sub US$50 per barrel, the oil rig decline trend continues at 9 per week.  

Oil Price….

Crude oil futures fell on Wednesday as investor focus shifted back to a deep global supply glut and away from the threat of escalating violence in the Middle East, which pushed prices to two-week highs the previous day.

Brent, the global benchmark for oil, was up 47 cents at US$44.89 a barrel, reflecting a gain of 1% on the week.

U.S. crude rose US$1.76 to US$41.97 a barrel, up 4% on the week.

U.S. Supply and Demand…..

U.S. crude oil refinery inputs increased to an averaged 16.4 million barrels per day, with refineries at 92% of their operating capacity last week.

On the supply side, U.S. oil production in the Lower 48 decreased by 26,000 barrels per day last week with total production at 8.637 million barrels per day.  

U.S. crude imports averaged 7.3 million barrels per day last week, an increase of 365,000 barrels per day from the previous week.  Over the last four weeks, crude oil imports averaged 7.2 million barrels per day, inline with the same period last year.  

Crude oil inventories increased by 1 million barrels from the previous week, the crude build being driven by imported oil.  Cushing’s storage (the main price point for WTI) increased by 1.7 million barrels per day, bringing the last three week total increase to 5 million barrels.

Source: EIA Weekly Update and GCA Analysis

Authors

P Kevin Galvin

Principal Advisor, Field Development Planning - kevin.galvin@gaffney-cline.com