Land Rig Uptick Could Emerge Next Year
Changes in the number of operating US land drilling rigs will likely remain unimpressive through this year, but 2021 could bring a rig count rebound – albeit a measured one.
So says one of Rigzone’s regular market-watchers, Matthew Veazey. Keep reading to learn the driver behind this possible scenario, along with additional insights, in this instalment of what to watch this week on the oil and gas markets.
Tom Curran, Senior Energy Services and Equipment Analyst in Equity Research, B. Riley FBR, Inc: That elusive trough in the US land drilling activity – yeah, the same one that we thought might be imminent exiting June and have been on the weekly lookout for since. The earlier haemorrhaging of rigs slowed to more of a steady drip for several weeks.
From the 12th June to the 24th July 2020, the Baker Hughes working US land drilling rig count fell by a total of 27 rigs – from 266 to 239. But, over that period, each Friday’s count brought a sequential decline – with last week’s 239 registering as the latest record low in more than a generation.
When this slow bleed does finally stop, we expect the rig count to churn sideways for a while, oscillating within a tight range off the bottom until at least early 2021. At that juncture, we believe refreshed exploration and production budgets will fuel a renewed – but gradual and circumspect – uptrend in drilling.
Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: The OPEC+ group’s decision to increase their collective output by two million barrels per day (bpd) took effect on the 1st August at a time when the consensus remains that a global surplus exists and demand continues to be stifled by the coronavirus.
Barani Krishnan, Senior Commodities Analyst at Investing.com: More volatility, on both prices and the US Energy Information Administration (EIA). Prices because now we have had the worst GDP for a quarter in the history of the United States that has officially put us on the path of recession.
Despite stimulus and other mitigating action like the Paycheck Protection Program, the Trump administration is still struggling to land the economy on a softer path. We have no idea as yet how long it will take for us to return to positive growth, although the jobs recovery in May and June have been somewhat encouraging.
Fed Chairman Jay Powell already warns us to prepare for a slowdown in the recovery as the virus rears its ugly head for a second time. The volatility in the EIA’s numbers is probably a function of the virus’ impact on demand and the mitigation attempts done toward recovery. Whatever the case, it doesn’t calm the market’s nerves.