After three weeks of modest gains, rig counts have resumed their decline, giving back all their gains in just this past week
Rig counts
Total oil rig counts: -8 to 496
Horizontal oil rig counts: -8 to 443
The Permian horizontal oil rig count: -4
The Canadian horizontal oil rig count saw progress this week, +1 to 120, but still is 16 below this week last year
The US horizontal oil rig count is falling at a pace of -0.5 / week on a 4 wma basis.
This number has been negative for 46 of the last 48 weeks
Frac spreads fell, -5 to 270
As last week, there is a stark mismatch between rigs and spreads, with DUC inventory, as measured in days of turnover, falling to a nine-year low of 13.6 weeks
The rig / spread relationship remains highly unstable
To attain stability in the DUC count, rigs must either rise by 83 or spreads must fall by 42.
Given that rig counts are falling at an implied WTI price above $90 / barrel, a rapid roll-off of spreads seems likely at some point
Interestingly, the Brent Spread (Brent – WTI) opened back up to $4+ / barrel in the last two weeks
An open spread has implied US production growing faster than Brent zone production, compelling US operators to offer a modest discount to place incremental barrels in the market
Historically, this spread is associated with US production growth around 400 – 600 kbpd / year
If that remains true, then EIA pessimism on US short-term C+C growth is misplaced