Houston — The US oil and gas rig count dropped by 12 to 357, rig data provider Enverus said Thursday, marking the slowest week-on-week decline in more than two months since the coronavirus pandemic sparked an industry downturn.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
Oil rigs were down 10 to 246, while gas rigs were down two to 111.
This week's rig count drop represents the lowest fall in totals in 10 weeks, a slide which began after a sharp plunge in oil prices in early March from levels around $46/b into the $20s/b just a couple of weeks later.
Since the rig count began shrinking, nationwide totals are down 57%, or more than 475 rigs.
Prices have begun to rise in the last couple of weeks, and WTI on Thursday was just below $34/b as the worldwide oil oversupply, much of it brought about by low demand from the virus outbreak, slowly starts to diminish.
"As oil prices started to stabilize above $30/b, US rig counts have slowed their rate of decline dramatically," said Matt Andre, an analyst for S&P Global Platts Analytics. "The prior nine weeks averaged a 50 week-on-week rate of decline."
PERMIAN SHEDS 57% OF RIGS SINCE EARLY MARCH
The Permian Basin accounted for most of the drop in total rig count this week, with the West Texas/New Mexico play's fleet down by 10 to 185.
Since oil prices took a downward turn in early March, the Permian has shed 57%, or 243, of its rigs.
A couple of other large oil basins lost several rigs apiece this week. The Eagle Ford Shale in South Texas lost three rigs, leaving 20, while the Bakken Shale in North Dakota and Montana shed two rigs, leaving 15.
But the natural gas-prone Marcellus Shale, mostly sited in Pennsylvania, gained a rig for a total 29. Rigs totals in the "other" basins category, generally smaller or less-active basins, rose by three to a total of 49.
Andre noted the rig count in the other major oil basins, including the Bakken, DJ, Eagle Ford and SCOOP/STACK, have each fallen by 70% since early March, while the gas basins, including the Marcellus, Utica and the Haynesville, have only declined by 22%, or 20 rigs.
Oil prices, after a horrendous multiple-week slump, rose dramatically in the last week, according to S&P Global Platts Analytics. WTI averaged $31.03/b, up $6.33, while WTI Midland averaged $31.86/b, up $4.73, and the Bakken Composite price averaged $31.28/b, up $4.69.
Gas prices were fairly stable. Henry Hub gas averaged $1.70/MMBtu, up 1 cent on the week, while at Dominion South, prices averaged $1.31/MMBtu, down 3 cents.
STORAGE, OIL OUTPUT DATA FAVORABLE
The slowing decline in rig counts followed new oil storage and crude production data that showed a second week of crude inventory drawdowns and further slippage in oil production.
US crude output, which totaled 11.5 million b/d last week, was the weakest since October 2018 and down 1.6 million b/d from its mid-March peak. It was the smallest weekly decline reported by the US Energy Information Administration since mid-April, and suggests production is stabilizing as crude prices have rebounded to over $30/b this week.
US commercial crude stocks fell 4.99 million barrels in the past week to 526.49 million barrels during the week ended May 15, EIA data showed. The decline put stockpiles 10.1% above the five-year average, in from 11.4% the week prior.
As more US states and countries began to permit more mobility among populations and reopen businesses closed during the pandemic, observers have begun to see upticks in oil usage amid much less production.
"Challenging times ahead, but it feels like we are nearing the bottom of the rig count decline," Evercore ISI analyst James West said in a Thursday investor note.
"Weekly rig count declines are starting to shallow out from where they started at the beginning of the downturn," he added. "Drilling permits fell sharply in April but also are likely near a bottom after hitting a nearly 15-year low."
Kevin Neveu, CEO of North American land driller Precision Drilling, also thinks an industry bottom is at hand, although he said recognizing its arrival may be difficult.
"I'd be surprised if the wind-down takes longer than the second quarter," Neveu said. "But I think it will be hard to call the bottom until it's well in our taillights."