US Rig Count Surges +20
November 20, 2016 ~ Energy Update
Global oil production is still too high relative to demand.
Oil prices remain volatile in the wake of last week’s surprise election results, which saw Republican Donald Trump win the White House. The tug of war in prices is most likely to persist in the short term as heavy skepticism is weighing over whether OPEC will reach a deal by its Nov. 30 meeting. Iran has been the main stumbling block for capping production and most analysts remain doubtful about the ability of OPEC to reach a consensus among its members. In addition, a strong dollar and an unexpected gain in oil inventories are providing strong headwinds against higher oil prices.
For the week, Brent and U.S. crude both rose roughly 5 percent, their first weekly gains in about a month.
Crude Oil Brent F Jan ’17 (QAF17) NYMEX notched a daily rise of 37 cents, or 0.8 percent, to $46.86 per barrel. Brent also had its first weekly increase in five weeks but remains down just over 9% in the last month.
U.S. West Texas Intermediate crude (CLZ16) NYMEX was up 27 cents, or 0.6 percent, for the day, at $45.69 a barrel. It posted its first weekly increase in four but remains down almost 5% in the last month.
NAT GAS PRICING
With US natural gas inventories at 5.6% above their five-year average, natural gas prices have stumbled in response to recent warm weather, which has suppressed demand. With cooler weather now arriving across much of the country, gas prices should stabilize. The benchmark gas futures contract is likely to return to the $3 per MMBtu level or a bit higher in coming weeks, as furnaces are ignited in response to the colder temperatures.
Natural Gas Dec ’16 (NGZ16) NYMEX was up +0.140 (+5.18%) at $2.843 per MMBtu down almost 19% in the last month.
RIG COUNT – US Total +20, Now at 588
Despite an increase in weekly crude inventory builds, Baker Hughes reported a significantand surprising 20 rig count increase this week to the number of active oil and gas rigs drilling in the United States, bringing the total number in the US up to 588. It was the largest weekly increase since July 2015, and the highest number of rigs since the week ending February 5, 2016. The rig count reflects an increase 19 oil rigs and 1 gas rig. The number of oil rigs now stands at 471.
Among the states, Texas added 8 rigs, Louisiana and Oklahoma added 4 each, Colorado added 2, and Utah added 1 rig. North Dakota, Pennsylvania, and Wyoming each lost 1 rig last week.
Texas Rig Count Up +8, Stands at 276
Midland County rose one rig to 33, but Reeves County, located in the Delaware Basin, topped the Midland Basin hot spot after posting 34 rigs, up eight. Dawson County saw its first activity since July 29 after two rigs went online. Garza County hasn’t seen activity since Sept. 30 and had one rig this week. Fisher County’s streak of eight weeks with one rig ended. Sterling County recorded one rig for the past 11 weeks but had none this week.
Rigs counts continue to stay strong in District 8, which rose 10 to 158 this week. Six counties have double-digit counts: Reeves, Midland, Martin (22), Loving (17), Howard (12) and Culberson (11). Other counties with double-digit counts in the Permian were Lea, New Mexico (16); Eddy, New Mexico (14); and Upton (11).
Without a doubt, all eyes are on the Permian Basin where the region’s six oil-rich geological formations have made it the hottest shale play in the United States. A recent report from the U.S. Geological Survey revealed that the Wolfcamp formation alone holds an estimated 20 billion barrels of oil, 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids. This West Texas shale play now accounts for half of the active rigs in the entire United States. Not surprisingly, the Permian saw the largest increase of 11 rigs, bringing the total rigs in the Permian to 229, which is four more than this time last year, making it only the second basin to be at or above last year figures, after the Cana Woodford.
The Eagle Ford Basin in South Texas has 38 rigs in operation, unchanged week over week, and the Williston Basin (Bakken) in North Dakota and Montana now has 34 working rigs, down 1 for the week. The Cana Woodford remains flat at 40. The Marcellus dropped down one and is now at 34.
Oklahoma accounted for 21% of the 19 U.S. rig count increase reported on Friday, gaining 4 rigs to 79, after falling 2 the week before. The high for the year is 88, set back on January 29th.
The Stack currently accounts for about 50% of the rigs at work today in Oklahoma with the Scoop adding another 25%. The rig count leader is Continental Resources Inc. (NYSE: CLR) which has 15 rigs at work, with 11 in the Stack and four drilling in the Scoop.
Alfalfa, Beckham, Candian, Ellis, Kingfisher, and Woodward Counties all reported increased HZ rig counts this week while Blaine, Major, and Roger Mills had decreasing rig HZ counts.