RigData Insights

Rig Counts and How They Don't Stack Up to Rising Crude Prices

  • Monday, June 4, 2018
  • Posted By Greg Tsichlis

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 Source: S&P Global Platts Analytics, Bob Williams, Director of Content

New and Potential Oil Output Growth Belies Modest Gains in Rig & Well Counts

 

Progress continues upward for the Platts RigData Land Rig Newsletter active US land rig count on a month-to-month basis. However, the percentage change in the rig count growth over the past year has not kept pace with the underlying catalyst for its improvement: rising crude prices.

 

During the last 12 months, the price of WTI has surged up by 56%/bbl, while the change in the rig count has only crawled forward, up 8% vs. year ago levels. Despite some commodities market concerns, the Platts RigData team continues to believe that the fundamentals remain more bullish for oil prices going forward than for rig count activity. The solid demand for global crude—coupled with some possible supply dislocations (due to sanctions in Iran and a continuing decline of Venezuela’s health)—present a plausible basis for suggesting oil prices could move still higher in the months ahead.

 

Conversely, domestic rig counts appear to be hindered by logistical constraints limiting the responsiveness of the US fleet to strong demand for this equipment. Challenges to staffing crews due to a tight labor market, a lack of excess production takeaway capacity, day rates that are not yet supportive to returns necessary to bring idle or new equipment online, and the lack of supportive prices in out-month futures contracts (which do not instill operators with confidence regarding the direction of prices and thus leaves the group less likely to enter into longer-term contracts) are all reasons for why the Platts RigData team believes the rig count could follow a muted path relative to crude prices in the months ahead.

Upstream Activity Data for North America 

For more information on North American upstream activity including permitting, drilling activity, production and completion data please contact S&P Global Platts via email customerservice@rigdata.com or call 800-371-0083.

 

 

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