This week’s numbers were all but disastrous. Both rig counts and shale oil output continue to fall
Rig counts
Total oil rig counts:-8 to 507
Horizontal oil rig counts: -8 to 451
The Permian horizontal oil rig count: -4
The Canadian horizontal oil rig count continues to lag, down 28 from last year.
The US horizontal oil rig count is falling at a pace of -3.0 / week on a 4 wma basis.
This number has been negative for 42 of the last 43 weeks
Frac spreads fell, -5 to 259 This is still too high for the current rig count, as DUCs continue to fall.
DUC inventory has fallen back to 15.7 weeks of turnover
The EIA’s latest DPR, published this past week, also shows shale oil output from the key plays declining, down 17 kbpd from July. In addition, the EIA is forecasting further declines, with October shale oil output down 82 kbpd from the July peak. That is, given the continued decline in rig counts, the EIA appears to be calling peak shale oil production for July 2023.
It is important to note that the EIA routinely revises previous output figures and that EIA projections should be considered provisional, not definitive. Nevertheless, the EIA production decline forecast is consistent with the chronic erosion of rig counts we have seen since last December.
Last week, I wrote this:
Lagged oil prices for the next eight weeks are consistently above $80 WTI, and at times well into the mid-$80s. As a result, we should in theory see at least modest life in the horizontal oil rig count. If we do not, it will be further evidence that the underlying problem is a lack of drilling opportunities, not unfavorable economics
Instead of modest rig additions, we see a stiff decline of 8 horizontal oil rigs this week, half of them from the Permian.
The continued decline of rig counts, particularly with lagged WTI above $80, is bad. The decline in shale oil output from key plays is bad. And the continued erosion in the DUC inventory is also bad.
There is nothing redeeming in the data this week. Perhaps the numbers turn around at some point, but right now, the picture is ugly.