Active U.S. rigs declined by 1.6% MoM and down 8.1%YoY per Baker Hughes. The total number of operating rigs in the U.S. the week as of June 21st was 967 with 789 oil rigs and 177 gas. In percentage terms, on a month on month, (m/m) basis, oil rigs were down 1.0% as gas rigs decreased by 4.8% . On a year on year, (y/y) comparison, total oil rigs were -8.5% and +5.9% for gas.
Figure 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 863 this week. Gas rigs bottomed-out at 81 in August 2016 and currently sits at 189 rigs.
More than half the total U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico, where active units decreased by six this week to 446, the lowest since April 2018. The Permian is the biggest U.S. shale oil play.
The rig count, an early indicator of future output, declined over the past six months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
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.