PFM Trading says the number of operational US shale oil rigs is nearing an all-time low as pain of downturn deepens.
According to PFM Trading, US shale oil rigs in operation are approaching an all-time low as drillers battle to remain afloat amid an industry downturn that shows no sign of easing. The number of rigs in operation has plunged by as much as 75% since June 2014 and, according to the latest rig count data from oil services company, Baker Hughes.
Just 489 rigs are operational, close to the 488 reached in 1999 in records that date back to 1949.
“There are voices in the industry suggesting that the shale drillers are holding their own by increasing efficiency but there’s no arguing with the numbers,” said Charles Bowater, an energy analyst at PFM Trading.
US oil – known as WTI or West Texas Intermediate – has fallen close to 70% since the summer of 2014 driven by acute oversupply in a demand environment that is in decline. OPEC, the Organization of Petroleum Exporting Countries, is not prepared to reduce its own output because it wants to preserve its share of the market, currently around 40%. This has help push prices even lower and squeezed the shale oil drillers who typically need much higher prices in order to remain viable economically.
“WTI has managed to rally by 35% since reaching a 12-year low on February 11 but unless OPEC blinks or the global economy miraculously turns around, price increases are likely to remain constrained” added Bowater.
A recent deal between Russia and Saudi Arabia saw two of the largest producers agree to freeze production level but they stopped short of the cut in output that many had hoped for. Iran, a recent returnee to the global energy markets, has refused to freeze production as it tries to regain market share lost during its years under international sanctions raising doubts over the credibility and longevity of the Russian/Saudi deal.
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