Bloomberg: “The shale-oil drilling boom in the U.S. is showing early signs of cracking. Rigs targeting oil sank by 14 to 1,568 this week, the lowest since Aug. 22, Baker Hughes Inc. (BHI) said yesterday. The Eagle Ford shale formation in south Texaslost the most, dropping nine to 197. The nation’s oil rig count is down from a peak of 1,609 on Oct. 10.”
“Drillers are slowing down as crude prices tumbled 24 percent in the past four months. Transocean Ltd. (RIG) said yesterday that its earnings would take a hit by a drop in fees and demand for its rigs. The slide threatens to curb a production boom in U.S. shale formations that has helped bring prices at the pump below $3 a gallon for the first time since 2010 and shrink the nation’s dependence on foreign oil imports.
“We are officially seeing the slowdown in oil drilling,” James Williams, president of energy consulting company WTRG Economics, said by telephone from London, Arkansas, yesterday. “There’s no doubt about it now. We’re already down 49 rigs since the peak in October. It’ll have fallen by more than 100 rigs by the end of year.”
U.S. benchmark West Texas Intermediate crude for December delivery rose 74 cents to settle at $78.65 a barrel on the New York Mercantile Exchange yesterday. Prices are down 17 percent in the past year.
Executives at several large U.S. shale producers, including Chesapeake Energy Corp. (CHK)and EOG Resources Inc. (EOG), have vowed to maintain or even raise production as they reported earnings this week. They say their success in bringing down costs means they can make money even if prices slump further.
The oil rig count will drop to 1,325 by the middle of next year amid lower prices, Genscape Inc., an energy data company based in Louisville, Kentucky, said in a report Nov. 6.
….While the drop in oil prices limits spending in shale plays, production will continue to boom next year and North America may become self-sufficient in oil by 2016, Per Magnus Nysveen, head of analysis for Oslo-based consulting company Rystad Energy AS, said by e-mail yesterday. Liquid output from North American shale will rise to 6.5 million barrels a day in December and to 12 million barrels by 2020, he said.
U.S. oil production climbed 2,000 barrels a day in the week ended Oct. 31 to 8.972 million, the highest level in at least three decades, Energy Information Administration data show.
WTI futures are still a “long way off” from rebounding, said Mike Wittner, the head of oil market research at Societe Generale SA. (GLE)
“The market needs to see much more significant reductions in the rig count on a steady, sustained basis for it to have any impact on production and prices,” he said by telephone from New York yesterday. “Growth is so strong now that it’s going to take a long time and many months for it to actually peter out and turn into negative growth.”
….Gas rigs were up 10 at 356, Baker Hughes said in data posted on the Houston-based field services company’s website.
U.S. gas stockpiles rose 91 billion cubic feet last week to 3.571 trillion, according to the EIA. Supplies were 6.8 percent below the five-year average and 6.3 percent under year-earlier inventories.
Natural gas for December delivery gained 0.8 cent to $4.412 per million British thermal units yesterday on the Nymex, up 25 percent in the past year.
“The gas rig count is responding to prices a little higher,” Williams said.”
Future Today
