U.S. Onshore Rig Count Increases For First Time Since November

U.S. Onshore Rig Count Increases For First Time Since November

22nd May 2015

The Baker Hughes U.S. onshore rig count has increased for the first time since November, adding 2 rigs compared to drops of 6 and 11 for the prior two weeks.  The U.S. onshore rig count has now declined by 1,024 (55%) from a November 2014 high of 1,876, to 856 on 22 May 2015.  Rigs active in the Gulf of Mexico decreased by 5 week-on-week to a total of 28 (17 oil focused and 11 gas focused).  U.S. crude prices remained relatively stable week-on-week at closing out the week at approximately US$ 59.70/bbl.      

For the first time since November, 2014, the Baker Hughes US onshore rig count increased.  While modest, the gain of 2 rigs (854 to 856) cements the slowing downward trend seen in recent weeks, and reflects the slow but steady gain in oil price that has taken place over the past three months.

It will be interesting to see how the market reacts to such a small numeric, but highly symbolic change.  Bulls and bears on near-term future oil prices still appear fairly evenly split, with half seeing a false dawn before US$ 50 per barrel appears again, and the other half still expecting further gains by the end of the year.  Reality is that no-one really knows, and everyone is focusing on weekly data to confirm or repudiate whichever trend they feel more comfortable with. 

GCA remains of the view that, absent a major external event, it is going to take a while for supply-demand fundamentals to assert themselves.  There is still a lot of oil in one form of storage or another, available to upset any short-term rally in prices and we still have yet to see the 2-3 million barrels per day of Canadian Heavy Oil, and oil from Brazil pre-salt, Deep Water and other major global projects which were underway before the crash and will still be adding large quantities of oil to the market in the next 1-3 years.  The real question, perhaps, is whether it is the Known Unknowns or Unknown Unknowns that will be the driver of near-term prices.


U.S. Onshore Rig Count Increases For First Time Since November

Neil Abdalla

Senior Professional, Geoscientist - neil.abdalla@gaffney-cline.com

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