Unless this is true worldwide and not just in the U.S. then this is only affecting the U.S. So, before you think we are in an oil recovery you need to check what is actually happening with oil rigs around the world.
begin quote from:
The
price of oil continued its modest rebound Friday as the number of rigs
drilling for oil and natural gas throughout the country dropped to its
lowest level on record. Falling drilling activity is adding to mounting
evidence that the …
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U.S. rig count falls to lowest level on record
by
Adam Wilmoth
The price of oil continued its modest rebound Friday
as the number of rigs drilling for oil and natural gas throughout the
country dropped to its lowest level on record.
Falling drilling activity is adding to mounting evidence that the oil industry has hit the bottom and has begun a gradual recovery, industry experts say.
"I think we've very much turned the corner," said Robert Dauffenbach, director of the University of Oklahoma's Center for Economic and Management Research. "Prices are certainly highly volatile. It may be that we retrace to some extent, but I'm thinking it's very indicative that the corner has been turned."
Domestic benchmark West Texas Intermediate crude gained 68 cents, or 1.8 percent, Friday to close at $38.52 a barrel. With Friday's gain, oil is still 64 percent below the June 2014 levels of nearly $108, but is up 48 percent from $26.05 over the past three weeks.
Falling drilling activity is adding to mounting evidence that the oil industry has hit the bottom and has begun a gradual recovery, industry experts say.
"I think we've very much turned the corner," said Robert Dauffenbach, director of the University of Oklahoma's Center for Economic and Management Research. "Prices are certainly highly volatile. It may be that we retrace to some extent, but I'm thinking it's very indicative that the corner has been turned."
Domestic benchmark West Texas Intermediate crude gained 68 cents, or 1.8 percent, Friday to close at $38.52 a barrel. With Friday's gain, oil is still 64 percent below the June 2014 levels of nearly $108, but is up 48 percent from $26.05 over the past three weeks.
Drilling at new lows
Low oil and natural gas prices over much of the past two years have led companies throughout the country to slash drilling budgets and activity.
The country's drilling companies laid down another nine rigs this week, dropping the count to 480, eight fewer than the lowest recorded level of 488 set in 1999, Baker Hughes said Friday. The company publishes weekly rig count numbers dating back to 1968.
The rig count has tumbled by 186 since the first of the year as continued low oil and natural gas prices have led companies to cut drilling budgets for 2016. The U.S. count peaked at 4,530 in 1981.
In Oklahoma, the rig count dropped by three to 67. The state level is down 67 percent from 214 on Nov. 26, 2014.
Oklahoma City University economist Russell Evans said the rapid drop in drilling throughout the United States could cause domestic production to fall by 500,000 to 700,000 barrels per day this year. While declining production is helping the market, Evans said both the oil and broader stock market also have benefited over the past few weeks from indications that the global economy is improving.
“The markets had priced in a demand discount accounting for the possibility that the world was heading into a recession,” said Evans, executive director of OCU's Steven C. Agee Economic Research and Policy Institute.
Over the past four weeks, however, reports have shown a better-than-expected labor market in the United States, stronger first-quarter gross domestic product numbers, no major bad news from China and more aggressive monetary policy in Europe and Japan, Evans said.
“All of that together is creating some very modest upward pressure on prices,” Evans said. “I tend to agree with the overall perception that if recessions don't materialize and if OPEC can continue to convince the market that they're at least not interested in letting production get more widely out of hand, I think all those things may help us establish a bottom.”
Despite the modest oil price gains over the past three weeks, prices still are too low for producers to be comfortable.
“I'm cautiously optimistic that if the current trajectory continues, we may be able to move through that $40 (per barrel) target and hold that,” Evans said. “I think that would go a long ways to helping our companies start to shore up their balance sheets and move forward.”
While higher oil prices would help energy companies meet their expenses, it also could lead production to increase, again threatening to flood the market and push prices lower. The country's producers have thousands of drilled, but uncompleted wells they could finish quickly when prices strengthen.
“I would expect to see some of those wells completed, but it will be interesting to see how successful those companies can be at disciplining themselves,” Evans said. “Will they be able to bring those wells online in a strategic and methodical fashion without putting rapid downward pressure on prices by overproduction? It will be an interesting exercise in market coordination that we've never seen before in this industry to this extent.”
Oklahoma economy
While falling rig counts are seen as good news for the broader energy industry, the trend has been devastating to some parts of rural Oklahoma.
“It means less employment in the oil patch,” Dauffenbach said. “In Oklahoma, that means the regions of the state outside of the Oklahoma City and Tulsa metro areas have been hit the heaviest in terms of employment declines.”
The Oklahoma City metro area added 6,700 jobs from December 2014 to December 2015, while the Tulsa area lost 1,800 jobs and the rest of the state lost 14,000 jobs, Dauffenbach said.
CONTRIBUTING: The Associated Press
Adam Wilmoth returned to The
Oklahoman as energy editor in 2012 after working for four years in
public relations. He previously spent seven years... read more ›
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