Active U.S. rigs climbed for the sixth week in a row per Baker Hughes. The total number of operating rigs in the U.S. the week as of March 2nd was 981, 800 oil and 181 gas. In percentage terms, on a month on month, (m/m) basis, oil rigs were up 4.6%, (+35 rigs) as gas rigs posted no change. On a year on year, (y/y) comparison, rigs were up +31.4% for oil and +24.0% for gas. The combined figure was +29.8% or +225 rigs. This is good news for sucker rod and oil country tubular products producers.

rigcount-fig1Figure 1 shows the Baker Hughes U.S. Rotary Rig Counts for oil and gas equipment in the U.S. from 2012 to present. Oil rigs rose steadily from 316 in late May 2016 topping-out at 800 this week, the highest level since April 2015. Gas rigs bottomed-out at 86 in August 2016 then rose steadily topping out at 192 late July last year. Gas rigs have been range-bound between 172 and 190 since then.

For the week ending March 2nd, Texas was operating 482 rigs, plus one off-shore rig, (49% of the total), followed by Oklahoma with 124, (13%), New Mexico with 88, (9.0%). Louisiana had 46 on-land and 13 off-shore, (6%). North Dakota’s count was 47, (5.0%). These five states together account for 82% of the nation’s rig count.

Prices are moving up. Referencing Bloomberg Energy, West Texas Intermediate (WTI) crude oil in intraday trading was at $62.15 today. Its range over the past 52 weeks has been between $4417 and $66.40 per barrel. WTI crude has been trending higher since its recent low of $42.53 on June 21st. Brent crude oil in intraday trading was at $64.97 per barrel today. Its 52 week range was $47.90 to $70.35 per barrel. Brent crude has been trending higher since its recent low of $45.22 on June 21st. Natural gas in intraday trading today was at $2.71 per MMBtu today. Its 52 week range was between $2.49 and $3.01 per MMBtu.

Canadian rotary rig count totaled 302 on March2nd, 211 oil rigs and 91natural gas rigs. These figures were down 9.8% m/m for oil and off 15.7% m/m for gas, 40 rigs or -11.7% on a combined basis. On a y/y comparison, oil rigs were up 7.1%, while gas rigs decreased by 34.1% for a combined decrease of 33 rigs or 9.9%. The province of Alberta had by far the greatest amount of rigs with 208, (67%), followed by Saskatchewan with 62, (22%) and British Columbia with 23, (8%).

The outlook for U.S. shale looks very promising, according to an article from Bloomberg. “The U.S. is set to put its stamp on global oil markets for the next five years,” IEA Executive Director Fatih Birol said in a report published Monday. OPEC’s surging rivals, which also include Brazil and Canada, will leave little space for the cartel to expand even after its production curbs expire this year. The Organization of Petroleum Exporting Countries is riding high right now, defying the skeptics by going deeper than their pledged cuts and maintaining them for long enough to deplete bloated oil inventories. However, the ensuing price recovery has “unleashed a new wave of growth from the U.S.,” said the Paris-based IEA, which advises most of the world’s major economies.

Thanks to the shale boom, new U.S. supply will cover more than half the world’s oil demand growth to 2023, the agency said. Production from the prolific Permian Basin will double over the period and the country’s total liquid hydrocarbon output will rise to 17 million barrels a day from 13.2 million last year. The American surge and a slightly weaker outlook for global demand growth make uncomfortable reading for OPEC. The IEA slashed projections for the amount of crude needed from the cartel, indicating its supply cuts would need to stay in place until 2021 to avoid creating another prolonged surplus.

 

At Gerdau we monitor rig counts along with the price of oil and natural gas since it has a major impact on long product sales to include Special Bar Quality sucker rods for downhole pumping strings to merchant and structural products for rigs and oilfield equipment.