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US Oil Rig Count Tumbles To July 2011 Lows, Pace Slows
For the 11th week in a row (2008/9 saw 20 weeks in a row), US rig counts fell and production hit record highs. Rig counts are tracking the lagged price of oil's decline almost perfectly, with total rigs having dropped 32% from the highs. Notably last week's rig count drop was the smallest in 4 weeks (down just 48 to 1310) with oil rigs dropping 37 to 1,019. Oil prices dropped on this news on worries at the slowing pace of rig count closure.
Rig counts itracking 4mo lagged price perfectly but pace of rig count decline slowed this week - total rig count now down 32% ion last 11 weeks...
Price is dropping on the slowinghpace of rig count declines...
Rig count collapses as firms focus on efficieny and cash flow - raising production to record highs...
Charts: Bloomberg
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We rigged some folks.
In the industry getting rid of a rig is called, "Stacking a Rig." Here is a little clip I put together starring Hitler... finding out the rig he works on is getting stacked. https://www.youtube.com/watch?v=irFKLlpPCp4
We will never run out of oil.
rig count? no problemo! we are just climbing the wall of worry. you see its not how many rigs there are, its how many rigs the fake headlines say there are!
And for those that wonder why production isn't dropping as fast as the rig count is - the rigs that are coming offline are the ones that don't produce well in the first place.
That, and if they're only half way done with a well, they're not just going to pack and leave it unfinished unless they have no choice. A lot of capital is already sunk once they get to that point. That means that there will still be a lot of new wells coming online even as the rig count drops. It's a combination of taking the rigs in the more marginal areas offline first and the lag time between a rig coming offline and the latest well that it drilled being fracked and then starting to decline.
True enough. Shouldn't the focus really be if production is increasing as rapidly as it did six months ago?
Just US rigs. They are not dropping as much around the world
Says who? US is one of the few countries fracking shale and probably the only one with a large percentage of oil from shale.
I now how to fix the problem, print more money!! Then give it to rich people, while people like me continue to edge towards bankruptcy!
The Fed thought of that 100 years ago
Going by rig count is a bit deceptive. We have a very large number of rigs compared to the last oil boom. When we drop below 600 then we are in deep shit.....
indeed.
The world still runs on oil, period. Paper bullshit versus the real stuff...
Some will have access to reduced hydrocarbons, most will not...
We've gotten to the point of synthesizing hydrocarbons but they aren't shiny investments that will pay off quickly. I expect it will happen someplace else like China (who are doing the research to bring it online) first.
That still takes energy. Manufacturing something that is the equivalent of gasoline or diesel is technically doable, but it still takes energy to either get the hydrogen and carbon components and then assembling them and it takes energy to break longer hydrocarbon chains down to something liquid without just outright burning them.
Several new process's build up instead of cracking down and this is one of the reasons I'm a big fan of molten salt reactors, which the Chinese are also in heavy development to bring online. There are great possibilties prevented by small people.
Any process where all of the fuel is burned instead of being stored when enough of the fission products build up to poison the reaction is going to be preferable to what we have now.
Electricity is not the same as petroleum, unless you plan to put a thorium reactor into each car , ship, and airplane.
Electricity can be used to make hydrocarbons, we ust need a dependable sourse....
While that's undoubtedly where we're heading old papers costing out the process put the cost of production at around $0.45 per gallon of liquid fuel produced from water and atmospheric CO2 (circa 1970 and excluding the cost of the plant); today that's equivalent to around $2.70 per gallon. We'd probably need long term stable *wholesale* gasoline / diesel prices north of around $4.00/gal, or around 250% above present prices, to induce investment. We'll get there but it's going to be a while.
Just wait until we run out of oil storage....what will the price be when you cant buy it?
Why wouldn't you be able to buy it? The bigger problem would be nobody to sell it to. There will be a quick collapse followed by dozens of bankruptcies. Then prices would shoot back up.
They hyperbole is that rigs are getting shut down, oil should spike way back. Reality is they bought those rigs with debt and still need to service the debt or go bust, even if that means selling the oil at lower prices.
No matter, rally on. Stocks detached from oil to soar to new highs.
Got to keep pimpin to pay the bills....I mean pumpin. Storage will be the issue at some point. HARPEX running up hard on tanker rentals for storage. If the price drops further, there will be alot of people caught renting alot of ships with no one to buy the oil. This is why the price cannot go below the $48-54 range (for very long).
The implications of this situation are massive.
Yup, the junk bonds and the storage are the two things to watch ATM. If storage fills up, or gets otherwise cost prohibitive, will it be a fire sale, or will the producers be forced to shut some wells down? My bet would be on the fire sale, but it could be a bit of both.
The fire sale would come first, followed by shut downs, then bankruptcies.
Amazing to see the rig count plummet, yet production continues to climb. Shows that efficiencies of production are working toward profitability, at least for some of the producers...just as the industry has always behaved.
It's happening in the shale patch. Rigs past 3 years old are pumping at 5% depletion rate. The new rigs are pumping at 25-50% deplation rate for the first 2 years. Each new rig brought online has the same production as 5-10 old rigs being taken down. The rig count can plummet, but production will still increase for another 1-2 years.