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Total Rig Count Decline Fastest Since 1986 As Weekly Rig Count Drop Re-Accelerates
With crude production and inventories hitting record highs this week, it is likely no surprise that rig counts continued to decline - falling 40 to 988 total rigs (and down 42 to 760 oil rigs). This is the 18th week in a row of total rig count declines - equal to the record series from 2008/9. At 48.5%, this is the biggest 18-week decline since 1986.
- *U.S. TOTAL RIG COUNT DOWN 40 TO 988 , BAKER HUGHES SAYS
- *U.S. OIL RIG COUNT DOWN 42 TO 760, BAKER HUGHES SAYS
- Notably Arkansas and Kansas saw rig counts increase (8 to 9 and 12 to 13 respectively)
The weekly pace of decline has accelerated...
This is the biggest 18-week plunge since 1986...
And Production re-accelerates (US and Saudi oil production record high, Iraq and Libya also boosted production in March) even as rig count collapses...
And Crude's initial response...Nothing
Charts: Bloomberg
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Here's a good metaphor-
http://i.imgur.com/o12mZVZ.jpg
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
What's the lowest it's ever been?
They don't come much lower than the scumbag whp you use for your avatar.
Can't say but it would have been between 80 and 83 at least up here in Canada, Alberta just up and died, you could watch the rigs pack up and run for the hills It was also a time when 22% mortgages were the norm..
...and 30 years later, it's happening again. Alberta oil rig workers are waking up to termination notices slipped under the campsite door in the middle of the night. And the really unlucky ones are left stranded in the wilderness with no company transportation home. This time, the mortgage rates are below 3% but that doesn't help when a $130K paycheck becomes a $13K one on pogey.
I think about the poor bastards in Ft McMurry that bought a house last year for $700,000 because they were making that $130,000, the house that they could have bought for $350,000 in 08. Not to mention all the toys they bought like $80,000 pickups, sleds, cars, boats and RV's.
Here we go...
It held very steady at 0 rigs for a really really really long time. I always said it was just a fad.
Funny how WTI still stays up.
What does a trend mean to you?
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The rate of change of the rate of change of the negative rig count is increasing its rate of change.
Despite the EIA's guess, I think we've seen the high is US production in this cycle. We'll see what Bakken data says next week for N Dakota.
there's some fuckery afoot...
Some?
Now we watch the energy bonds. Oil is floating above $50 till the Wall St. players can unload their bonds and derivatives onto some other fool, but with so many players in the world go in different directions I'm not willing to bet on the flow of insanity.....
Some Houston apartments are introducing rent concessions and beefing up their marketing efforts to encourage walk-ins and lease-ups amid the oil slump that took oil from $100 a barrel in the summer to about $50 now.
http://www.bizjournals.com/houston/morning_call/2015/04/rent-concessions...
We'll start seeing these "3 months free rent" soon in the earl States as vacancy rates soar.
If this continues, the market will respond at some not so distant future date, and a snapback rally will occur. But with major, cheap oil, producers like Saudi and Russia pumping away, that snapback rally might be out on the long end of the time curve. America is a high cost producer, producing oil that is market profitable at over $80, more sustainable as a profitable enterprise at + $100.
Too many people count barrels of oil in reserves, not the cost of getting that oil out and to a refinery.
Just yesterday, the British released the numbers on Southern Englands shale oil reserves. 100 billion barrels. The comments sections in UK newspaper sites went wild with joy and the dream of riches for Britain. What all the commenters failed to read deep in the article was "Off the reserve of 100 billion barrels, 15% is considered recoverable." So 85 billion are too expensive to get out of the rocks, while 15% can be fracked at $80-$100 a barrel prices.
Now that is a huge difference. YET, UK folks are still talking about their 100 billion barrels. Someone teach them to read ALL of the numbers, please!
The per barrel price doesn't mean much anymore since most of the refineries are owned by the same guys pulling oil out of rocks. Currently they are making record margins on refined products and in some cases more than they were when oil was $100 a barrel. If you had to pay $50 for a barrel of oil that cost $65 to pull out of the ground, but could turn that oil into $100 worth of refined product, you are still making money.
You want to know the best thing about a free market. Even if someone says it would cost $100 per barrel to pull oil out of the other 85% reserves there will be people who figure out how to pull it out for less. The high cost is also for the first few barrels. Once you reach the oil and it starts flowing, the recovery costs drop dramatically. Above $80 making synthetic gasoline also becomes a viable play. Not to mention biofuels. The biggest enemy of the oil market is high prices. Once you price a commodity out of reach of the economy a funny thing happens, people stop buying it.
Just because thee commodities exchange says a barrel costs $50 doesn't mean the oil driller only makes money off selling a contract for that barrel to Goldman Sachs. I would argue that oil contracts are as fictitious as gold contracts. They have been turned into nothing more than a deck of cards to be shuffled by the commodity brokers so they can make profit off the churn. I wonder how many times Goldman rehypothecates a single barrel of oil they hold in a warehouse or tanker.
The entire idea of allowing speculators to purchase a product they can't do anything with is asinine. I wonder how much my lunch would cost if 100k traders could trade a contract representing my lunch between the time I place my order and have to pay for it. My guess is my lunch would end up costing a whole lot more.
Good comment, but There Ain't No Such Thing As A Free Lunch...
That's true. If it is high cost oil being extracted, then profits will be low no matter the chain of operations.
Since DeLorean TM
just because a lot of low-production rigs have been retired doesn't mean output has gone down. The main rigs are still producing massive amounts of oil and they can't stop no matter how low the price gets...they will have to produce even more to pay those sub-prime bills.
the next "correction" is going to be epic... and perhaps the final one
Long US dollar is one of the most crowded trades. ISIS shanigans going down in the middle east + Iran. Oil has dropped from $100 to $50 a barrel. To me there is more potential for upside when you weigh both sides. Yes, there is a glut of oil right now but this to seems like a time to buy when the fundamentals for oil look completely terrible and storage is overflowing.
The fed is backed into a corner and will jawbone about raising interest rates, but they won't. I find it unlikely the dollar will continue to strengthen - its had a rediculously strong run, and if it reverses just 10% oil will go up. Look at the effect that the dollar moves had on the price of oil a week or two ago when the fed removed the word "patient" but stated they are very much "patient"...dollar weakened and oil shot up.
Or if everything collapses 2008-2009 style, fed will print like no other again and the oil dip will likely be short lived....unless everything does fall apart but in that case I do stack/prep.
Plus, everyone on ZH thinks oil is going to $10 a barrell.
Yep, everything can be managed.
Except, despite 'peak oil', there is a surifet of supply, and in a weak worldwide economy, demand ain't so hot. And this is not short-term stuff. To BTFD in oil - be my guest, and good luck.
But over-supply and weak demand is fundamental shit, so here comes the unicorns and rainbows.
Riding down I-20 through Midland-Odessa 1 week ago: counted 63 full rigs stored just off highway, Cameron's gigantic yards choked to the gills with drill-stem, new equipment stacked everywhere in parking lots, laydown yards full-up.
Oil just discovered under London's Gatwick airport; 100 billion bbls. It's amazing, huh? Oil being found everywhere: Neptune in Pisces....until 2026.
http://www.wsj.com/articles/oil-price-drop-hurts-spending-on-business-in...
Salah,
Ever heard of energy being needed to extract energy? What's the net on the Neptune stuff?