Rigs and Spreads Oct. 13: Best week for rigs since last November

Rigs and Spreads

  • Rigs counts saw their best week since last November

    • Total oil rig counts: +4 to 501

    • Horizontal oil rig counts: +4 to 449

    • The Permian horizontal oil rig count: +1

    • The Canadian horizontal oil rig count saw a bit of life this week, +8 to 114, but still 26 below this week last year

  • The US horizontal oil rig count is falling at a pace of -2.5 / week on a 4 wma basis.

    • This number has been negative for 45 of the last 46 weeks

  • Frac spreads rose, +3 to 263  

    • As earlier, this is still too high for the current rig count, as DUCs continue to fall.  

    • To hold DUCs steady, the spread count must fall by 27

US Crude and Condensate Production Revisions

  • The most interesting news this week was EIA revisions to US crude and condensate production.in both the monthly STEO and weekly PSR 

    • US crude and condensate (C+C) production has been revised up 400 kbpd in the October STEO.

    • This changes the production narrative, as it shows almost unbroken growth from Jan. 2022 to Sept. 2023, with growth averaging about 1 mbpd / year despite falling rigs counts since last December

Since August 2022, a gap had appeared between US C+C production as reported in the weekly PSR and the monthly STEO (bottom graph).

  • As a result of this gap and the upward revision per the monthly STEO, the weekly C+C numbers have been revised up 1 mbpd in the last two months, bringing the PSR and STEO C+C numbers back into alignment (red circle, graph below)

  • This is a very large revision, but sometimes that's how it goes.  It does make the data harder to interpret.

The latest STEO (top graph) also shows US C+C production peaking last month.

  • Given the strength of trend to that point, a near term decline would seem less likely

  • Therefore, an upward revision of Q4 C+C numbers seems quite plausible

  • On the whole, however, the EIA sees US production peaking, which seems probable given on-going declines in rig counts, but timing is uncertain.