The slide in US oil and gas drilling seems to be coming to an end as the number of active rigs being taken out of work slows by the week.
The weekly survey of US rig use in the oil and gas sectors from services group Baker Hughes showed the smallest fall in months last week – a total of 8 rigs, with six of those in the oil business.
Nevertheless the 888 rigs in operation across the US is down 973 from the peak last year. That’s a fall of 58% since early December.
It was the smallest fall since the first week last December (when three rigs were added) and is smaller than the 11 rigs taken out of service the week before, more than 20 a week in April and 97 in one week in January.
US oil production is now falling and probably will continue to do so. US oil stockpiles are starting to fall (but are still 40% above their average for mid-Spring).
This rebalancing of drilling activity means there will be falls in production most weeks for the next few months as the sharp rise in output from rigs drilled late last year eases.
But we could also see a rise in rig use if prices continue to edge up as more US companies become confident that oil will not fall below $US45 to $US50 a barrel, and will at times run up well past $US60 a barrel.
If that confidence takes hold, the number of wells drilled will start rising, leading to a rise in production as the year continues.
The US oil industry, especially the tight shale producers, are the global swing producers and it is clear they are adapting faster to the lower price environment than anyone believed.
US oil prices closed lower on Friday, as the rig use news failed to have an impact on the price falls caused by a weak US dollar.
On the New York Mercantile Exchange, June West Texas Intermediate crude futures eased 19c, or 0.3%, to settle at $US59.69 a barrel.
But they closed with a small gain for the week to be up for a 9th successive week – Marketwatch.com said that was the longest winning streak for oil in US futures markets for 30 years.
In London Brent crude for July delivery ended at $US66.81 a barrel, up 11c or 0.2% on the day and 2.2% for the week.
Meanwhile Comex gold futures in New York rose in the last few minutes of trading to be up 10c on the day and more than 3% for the week – a big beneficiary of the sliding US dollar which touched three month lows against the euro on Friday.
Gold for June delivery settled at $US1,225.30 an ounce on Comex, the highest settlement in about 3 months and up 3.1% for the week.
Comex July silver added 9.8c, or 0.6%, to $US17.563 an ounce to be up sharply – 6.7% over the week.
But Comex July copper was nearly flat at $US2.925 a pound on Friday and could only manage a gain of just 0.1% for the week.
