Oil is Plodding, Oklahoma Steams Ahead
December 23, 2016 ~ Energy Update
Since oil began falling in 2014, predicting where oil prices are headed in the next month or next year is a game of hit and miss, where even the best experts can be wrong. No one can truly keep track of all the moving parts of the market.
OPEC producers confounded doubters by agreeing to have its first production cut in eight years on Nov 30. The significance of that agreement is it will drain oil inventories by a cumulative 1.8 million barrels of oil per day, for a total global production cut of 2%.
The OPEC members account for a little more than a third of daily production, so their actions and words matter in the short run. But OPEC cannot counteract market forces, which tend to bring supply back relatively quickly when prices rise.
For now, with oil above US$50, US shale oil companies have used this as an opportunity to hedge their oil price risk between 2017 and 2019 at above US$50 a barrel. This also implies that the US$50 level will be a buffer for oil prices moving forward.
Rig Count Summary – Source: Baker Hughes
Baker Hughes has reported yet another increase in the U.S. oil and gas rig count this week, with another 16 rigs added over last weeks total. The brings the total number of US active rigs to 653, only 47 rigs below the count this time last year.
Oklahoma and Woodford lead way
In a departure from the usual Texas-led weekly increases, Oklahoma took the largest share of freshly running rigs this week, gaining 6 units to 84, up 30 since June 24.
The Cana Woodford rose 2 units to 36. Broken down, we show the STACK with 24 rigs and the SCOOP with 12 rigs.
Texas maintained its recent upward pace with a 4-unit rise to 321. The Permian also was up 4 and now totals 262.
This week’s energy report has been shortened due to the Christmas weekend. Merry Christmas, Happy Hanukkah, and Happy Holidays to our readers, supporters and friends.
Compiled and Published by GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma. ☞Email:firstname.lastname@example.org