Oil rig count decreased
Oilfield service company Baker Hughes (BHI) reports that the weekly US crude oil rig count decreased by eight in the week ended May 15, down from 668 to 660. The number of active oil rigs is now at its lowest level since August 20, 2010.
The steepest decline in oil rig activity since 1990 occurred January 30, 2015, when the weekly oil rig count decreased by 94.
The latest figure marks 23 consecutive weeks of fewer active crude oil rigs. In those 23 weeks, the crude oil rig count has crashed by 915.
Among the major resource shales, the main reductions last week occurred in the Permian Basin, located in Western Texas and Southern New Mexico, where the rig count declined by three. In part four of this series, we’ll discuss the Permian Basin rig count in more detail.
In the “other basins” rig category, the crude oil rig count also decreased by three last week. The rigs in “other basins” are those in smaller basins, or rigs that don’t fall within a specific geographic basin.
The crude oil rig count has fallen by 949, or 59%, since hitting 1,609 rigs on October 10, 2014. That week, the crude oil rig count was at its highest since July 1987, according to Baker Hughes’s records.
Producers are at risk
The price of crude oil has fallen sharply since June of last year, and remains on the lower side. When oil prices fell for a sustained period, oil producers, including Whiting Petroleum (WLL), Denbury Resources (DNR), Cenovus Energy (CVE), Laredo Petroleum (LPI), and Marathon Oil (MRO) have to cut rigs in operation to reduce costs. Marathon Oil accounts for 1.3% of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
Activity in the oil-rich Permian Basin in West Texas drove most of the decline last week.