27 Rigs down While Oil Drops 12% to $57.81
Why is OPEC cutting production? OPEC will gain relevancy again by pushing prices down below $60/barrel. At this price, several OPEC country members are below their break-even price; however, the OPEC countries likely have enough capital reserves to wait out the bottoming of the price. The two key uncertainties we see are OPEC and global demand.
This downturn is much different from 2008. Many economists and traders are pointing towards gains in other areas while the Energy sector is in turmoil. Yet, most of key commodities are declining and near 52 week lows. This year WTI is down 41% with a bottom not in sight.
Meanwhile, IEA cuts global demand forecast. This is the fourth time the forecast has decreased this year.
This week Permian Basin is -20 compared to previous week and +71 compared to last year at this time. Permian was the hardest hit this week with Reeves county down 11 rigs from the previous week.
Eagle Ford is -2 compared to last week and -25 compared to last year. Click here to see the interactive weekly insights report.
Bakken has 188 rigs running -1 from last week but +10 compared to a year ago. Similar to Texas, North Dakota drilling permits peaked in October as the operators adjusted for 2014 and made 2015 plans. According to the NDIC’s Director’s Cut, there were 650 wells waiting on completion crews. The NDIC expects the rig count in Williston Basin to “fall rapidly in the first quarter of 2015.”
The Marcellus shale was +1 this week at 83 rigs and is -2 compared to last year. Mississippian shale play was flat this week and -3 compared to last year at this time. Niobrara is -1 this week and +8 from a year ago. These 6 shale plays account for 64% of the rig activity in the U.S.
Granite Wash was -6 this week and even compared to a year ago. Also, Utica shale play was +2 this week and +12 from a year ago.
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