The number of active oil rigs in the United States fell this week by 1 rig—it’s second loss in four weeks, and its third loss this year—in a sign that the gains we’ve seen week after week are starting to slow. Combined, the total oil and gas rig count in the US now stands at 950 rigs, with oil rigs falling by one and gas rigs falling by one.
The market may want to rejoice in this week’s falling US rig count, but things don’t look so good everywhere when it comes to oil prices—Baker Hughes also reported today that Canada’s rig count increased by 15, erasing—and then some—any optimism that may otherwise have come from the falling number of active rigs in the US.
Prices had fallen by mid-day on Friday on reports that OPEC’s production would likely increase in July, lowing compliance from the cartel, which had dipped in June as well. Estimates are that OPEC production in July will exceed 33 million bpd, with production increasing from the United Arab Emirates, Nigeria, and even heavyweight Saudi Arabia.
At 11:23 am EST, WTI was down 1.56% at $46.19 while Brent crude was up 1.38% at $48.62—both benchmarks below last week’s levels.
Ironically, or perhaps fulfilling earlier suggestions along these lines, OPEC’s noncompliance may yet prove to be the best antidote—albeit a temporary one—to US shale’s aggressive growth, which has seen a near 50-percent increase to the number of active oil and gas rigs in 2017 alone. As the market shows its displeasure with OPEC’s rising production, prices fall, and these lower prices may put pressure on the US shale industry, and may result in fewer rig gains each week. Unfortunately for OPEC—who appears to be in a bit of a pickle—while the lower prices may slow the run on US shale, as long as prices stay low, OPEC’s many oil-dependent economies will continue to suffer budget holes, and Saudi Arabia probably cannot afford an Aramco Valuation with lower oil prices. The reality may be at this point that OPEC’s only remedy is significantly increased demand, without which there may not be enough room for all the oil players to pump at-will.
At 16 minutes after the hour, WTI and Brent prices had fallen further and were trading at $45.90 and $48.27 respectively.
By Julianne Geiger for Oilprice.com
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