The number of rigs drilling for oil and gas across the U.S. continues to rise, but analysts differ on whether a downturn that began two years ago will come to an end anytime soon.
The U.S. rig count increased by nine last week to 440, according to oilfield service company Baker-Hughes. The rig count has risen five of the past six weeks, though it remains at 423, or 49 percent lower than the same time last year.
Combined with the 10 gained a week earlier, it is the biggest two-week increase in a year.
The Gulf of Mexico rig count, which has the greatest impact on Houma-Thibodaux's oil-based economy, remained steady at 18 last week, according to the Louisiana Department of Natural Resources. It's down by 13 rigs, a 42 percent decline from a year ago.
The U.S. rig count peaked at 4,530 in 1981 and hit its low in May at 404.
Crude oil prices, meanwhile, have traded around $50 a barrel since May, rising 26 percent over the past three months and 80 percent since February. Nonetheless, prices are still at less than half their level from two years ago.
U.S. and world benchmark crude ended last week's trading at just under $46 a barrel, down by more than 7 percent, their largest decline since January.
Houma-Thibodaux residents have watched the numbers as the downturn continues to take a toll on the local economy. Terrebonne and Lafourche parishes have lost more than 7,000 jobs combined over the past two years, and the latest state figures peg the local unemployment rate at 6.6 percent.
Analysts differ on whether the world oil glut that has driven prices down will diminish significantly anytime soon, triggering an upswing in drilling and hiring.
The rise in U.S. rig counts has been seen mostly in U.S. shale fields, where analysts say break-even prices for drilling crude are lower than those in the Gulf.
Darrin Turner, a portfolio manager at the international investment firm Invesco, wrote in a blog post last Thursday that onshore OPEC fields in the Middle East still have the lowest break-even costs at $10 to $40 per barrel.
"U.S. shale remains competitive in the higher part of that band, requiring an oil price of $30 to $80 per barrel to break even, depending on the project," he wrote.
Evan Kelly, writing for the trade journal oilprice.com, shared the same concerns as other analysts about an Energy Information Agency report issued last week that says U.S. crude and gasoline inventories have both failed to see the declines that many industry analysts had expected. That has helped push crude prices to a two-month low.
"Industry estimates called for a drawdown of roughly 6 million barrels, but the EIA revealed a weaker 2.2 million barrel reduction, disappointing oil traders," Kelly wrote. "Meanwhile, gasoline stocks, still at elevated levels, barely budged. Coming on the heels of a downward revision for U.S. gasoline demand from the EIA for April, the demand side picture does not look quite as good as once thought."
Meanwhile, the Wall Street Journal noted that a surge of production is under way in the Gulf of Mexico. The newspaper reported June 24 that its analysis of of government data, company statements and regulatory filings shows more than half a million barrels of additional oil will be produced in the Gulf through 2017.
"Gulf production is rising in part because a handful of massive oil fields sanctioned for development years ago by companies like Freeport McMoRan Inc. and BP PLC when prices were higher are starting to pump oil this summer and fall," the Wall Street Journal reported. "But it is also going up because companies are finding that smaller satellite fields can be tapped relatively cheaply by linking them to existing offshore oil platforms by way of underwater pipelines."
The added oil could contribute to the world glut that has kept prices low, causing massive layoffs throughout the industry, the newspaper reported.
The American Automobile Association, in its weekly market analysis, noted that OPEC production had reached multi-year highs and that other countries continue bringing more oil online.
"Global oil prices continue to point lower thanks largely to indications of increased supply," the AAA said.
Posted on Tue, July 12, 2016
by By Keith Magill Daily Comet Executive Editor