North American Active Rig Counts Plunge to Record Lows
Rig counts in the United States, an early indicator of future output, fell for the 11th straight week to reach record lows, as E&P companies cut spending in the aftermath of the oil price collapse since the beginning of the year.
The active rig count fell by 21 last week to a record low of 318 on May 22nd, according to data published by oilfield services firm Baker Hughes Co. The previous low count was recorded during 2016 when the WTI crude price dipped to below US$34 per barrel, with 404 rigs operating in the U.S. at the time.
Canadian rig counts also fell to a record low for the second straight week according to the Baker Hughes data. The data showed that, year-on-year, drillers have cut rig deployment by 68% in the U.S. and 73% in Canada.
The decline in the number of operating rigs over the past two months is also in line with Energy Information Administration’s (EIA) projections of a sharp reduction in oil production in the U.S., which touched 11.5 million barrels per day (MMbbls/d) for the week ended May 15th, nearly 1.6 MMbbls/d lower than the all-time recorded earlier this year.
Analysts expect drilling companies to continue to reduce active rig counts during the remaining of the year, as lower crude oil prices lead to further cuts in capital spending, especially by shale-focused fracking firms that require US$40+ per barrel prices to sustain their operations. WTI crude oil futures for near-month delivery are currently trading at around US$34.50 per barrel, down approximately 44% since the start of the year. Prices have risen steadily over the past month, recovering from around US$10.30 per barrel a month ago, after briefly trading in negative territory on April 20th.