Wednesday, October 17, 2012

US Oil Rig Boom Leveling Off?


I just thought to check this following the Presidential debate last night.  The above shows the weekly Baker Hughes count of oil rigs drilling in the United States.  This number has been in a near-vertical climb ever since the beginning of the economic recovery in 2009.  However, in the last few months there are signs of it leveling off - whether temporarily or permanently I don't know.  It has certainly been an incredible boom.

The sevenfold increase in rigs since the mid 2000s has so far produced about a 20% increase in oil production:


There also seems to be some sign of leveling off in that series.  It will be interesting to see if the production continues to rise if we hold drilling at the current very high level.

11 comments:

Greg T. Jeffers said...

Good grief.

If the Oil Service Companies' stock price did not go vertical in that environment I wouldn't want to be long them right now.

Kweksma said...

I had to read that three times, but still doesn't sink in: "a 7 fold increase in the number of drilling riggs produced 20% more oil..."

petemason said...

I thought i read somewhere they had simply used up all available rigs.

Trajork said...

This is the most alarming graph I have seen in a very long time. We got 20% more oil for a 600% increase in drilling rigs. This isn't good...

One question: where is this from? I'd like to read more so I can understand exactly how this happened.

Stuart Staniford said...

Trajork: the production data are from the EIA for field crude here:

http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm

The rig data are from Baker Hughes here:

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm?showpage=na

Bruce ASPO-Oz said...

Most of the increase in the number drilling rigs is probably due to gas exploration, so it would be best to either add the oil and gas increase and compare the total to the number of rigs, or try to guess how many rigs were drilling for gas and how many for oil

Stuart Staniford said...

Bruce - the top graph is just oil rigs, not oil and gas combined.

rjs said...

im writing up capacity utilization from the Fed; we're over 89% for "mining" which would include your rigs...petemason is probably right; there's simply no more rigs available..

rmjblog said...

So this is, the average level of prices (and nearby expectatives) make almost every known rig profitable. The problem is how long are they going to produce oil with nowadays cost.

When oil from these rigs becomes a bit scarcer and there are no extra free rigs (only 11% left according to the previous commentary), shouldn't prices start increasing faster (if the economy doesn't get depressed, I know)?

I mean, it seems we are now using a cushion of oil and it seems it is close to its limit.

rjs said...

rmjblog, since you seem to be referencing my comment, perhaps i should clarify...

the Industrial Production and Capacity Utilization report breaks all production & plant utilization into three general categories; manufacturing, utilities, & mines..."mines" includes all the extractive industries, such as oil & gas drilling...

http://www.federalreserve.gov/releases/G17/Current/default.htm

this release tells us that 78.3% of our total industrial plant and equipment was in use during september, which was up 0.3% from the level of August, and 1.1% above the utilization level of a year ago...manufacturing capacity utilization is up 1.3% from a year ago to 76.8%, so called "mining" usage has increased 1.6% from a year ago to 89.1%, but utility utilization has decreased -2.8% from a year ago to 74.8%...in the past year, manufacturing capacity has grown 1.4%, mining capacity is up 2%, and utilities have increased their capacity by 2.3%...

since "mines" also includes everything from coal to copper, that 89.1% usage suggests to me that rigs are probably nearly 100% in use...but it's obvious that if the oil companies want more because of higher prices, the oilfield service companies will build them...

rmjblog said...

thanks for the info, rjs