By: Nadia Saleem, Editor, Pipeline Magazine
Global rig count in August saw a slight decline as energy drillers eased spending in some parts of the world, mainly the United States, which accounts for almost half of the world’s rigs.
According to closely followed report by Baker Hughes, a GE Company (BHGE) that indicates future output, rigs in the U.S. were down to 926 in August, compared to 955 in July and 1050 in the same period last year.
This was also the country’s record monthly low this year. Meanwhile, the rig count fell 29 in September, and 80 during the third quarter, the biggest quarterly decline since the first quarter of 2016.
The oil rig count has declined in U.S. over a record 10 months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Although oil output rose recently, fewer rigs mean operators are becoming more efficient with technology and techniques to extract crude oil. So although the rig down has slightly eased, oil production may continue to rise.
The U.S. Energy Information Administration said U.S. oil output from seven major shale formations is expected to rise by 74,000 barrels per day (bpd) in October to a record high 8.843 million bpd, according to its monthly drilling productivity report.
The West Texas Intermediate (WTI), the preferred benchmark followed in the United States, traded at an average of $xx during September. Prices were capped as worries of supply triggered by attacks on Saudi Aramco facilities was tempered by global demand woes amid slowing Chinese economic growth.
Elsewhere, the Middle East, which accounts for almost a fourth of global oil rigs, also saw the activity decline - the rig count during August was 416, down by 8 compared the prior month but up from 402 in the earlier year comparative year, the BHGE report showed.
Saudi Arabia dominated in the region with 114 rigs, down from 125 in the prior month; Iraq on the second spot held its number of rigs at 77, while the United Arab Emirates held steady with 63 rigs in actions. Also seeing no change in the number of rigs in the last two months was Egypt at 22 and Oman at 53.
Saudi Arabia, Iraq and the UAE, as OPEC members are part of a pact to cut oil production to bring global inventories under control as oil prices languish. Along with Russia and other allies, OPEC has agreed to cut oil production by 1.2 million bpd from January 2019 until March-End 2020.
This means that new rigs to boost oil production is unlikely in the near term in these countries, even as new gas and downstream projects are announced in the Kingdom and the UAE.
Oil production in Saudi Arabia took a hit mid-September, after drone strikes at two of its major facilities cut output by half. Although unofficial reports saw the country has quickly recovered to return to full output, industry pundits saw repairs to damaged facilities could take months.
Meanwhile, rig count in Europe was 193 during August, down by seven from the prior month, while Latin America dipped to 194 from 201.