Out With The Old, In With The New – Rig Count Climbs Again
A Look Back At 2016
Things were ominous for the oil industry at the start of 2016. Oil prices kept sliding, falling to $26 a barrel, the lowest level since 2003.
Fast forward 12 months and the U.S. oil rig count ended 2016 just below year-ago levels as drillers added rigs this week as part of the biggest recovery since a global oil glut gutted the market over two years ago.
Since crude prices recovered from 13-year lows earlier in the year to around $50 a barrel in May, drillers have added a total of 209 oil rigs over 28 of the past 31 weeks. The total oil and natural gas rig count ended 2016 at 658, down from the 698 at the finish of 2015.
Oil prices posted the biggest annual percentage gain since 2009 on the back of an agreement struck between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries to cut crude production.
Brighter Prospects For 2017
Houston energy investment bank Tudor, Pickering Holt & Co. expects to see rising oil prices in 2017. It forecast a price of about $55 per barrel in the first quarter of the year, rising to around $75 by year-end.
Simon Flowers, chief analyst at consulting firm Wood Mackenzie, said the recent OPEC deal was a strong signal to the market, but his firm is less bullish. It forecasts a price of $55 to $60 per barrel in 2017. OPEC agreed to reduce its supplies by 1.2 MMbpd, while 11 non-members including Russia and Kazakhstan pledged to curb output by almost 600,000 a day.
The Federal Reserve Bank of Dallas’ latest Beige Book, an economic outlook report, said oil and gas activity is expected to gradually pick up and that there’s a sense that 2017 would be better than 2016.
“People are excited that OPEC is going to hold firm and there will be a substantial reduction in inventories,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass., reported this week to Bloomberg. “The market should rebalance in 2017.”
The U.S. rig count could surge as much as 30 percent in 2017 as companies work to meet production targets, an analyst’s forecast shows. Analysts at U.S. investment bank Piper Jaffray, recently forecast the total oil and natural gas rig count would average 723 in 2017 and 933 in 2018.
With each new year, we get a fresh, clean page to start over. Here’s hoping that life writes a beautiful new chapter for the oil and gas industry and that President-Elect Trump does indeed make America great again. Happy New Year!
CLICK HERE TO SUBSCRIBE TO OUR WEEKLY OIL AND GAS INDUSTRY NEWSLETTER DELIVERED DIRECTLY TO YOUR INBOX FROM OKLAHOMAMINERALS.COM
Compiled and Published by GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma. ☞Email:[email protected]