Permian Panic Continues As Rig Counts Rise Amid Record Glut In Crude
With a record glut of crude and gasoline, US crude production pushed to new cycle highs this week and continues to track lagged rig counts.
US crude inventories are at a new record high...
And so are Gasoline inventories...
And the rig ccount keeps rising with lagged oil prices...
- *U.S. OIL RIG COUNT UP 6 TO 597 , BAKER HUGHES SAYS :BHI US
Highest since October 2015
Production keeps rising, and has a long way to go to catch up to the lagged rig count...
And the oil algo idiocy from DOE data has been erased with RBOB back below $1.50...
The surge in rigs has been driven almost 100% in the Permian,
The two great dueling forces in the world oil market, OPEC and American production, have created an atmosphere of uncertainty, as prices hover above $50. Last week the EIA reported another
Crucial to this situation is the state of the U.S. patch, particularly the Permian Basin, which since late last year has been the focus of recovering production. The
The Permian has seen the highest increase in rig count of any U.S. basin. Six of the twelve rigs added last week went up in the Permian, and its total now stands at 301 rigs, up from 172 a year ago, out of a total U.S. count of 741. In total the count is up 83 percent from May 2016, though it has yet to reach the booming numbers of 2013, when over two thousand rigs were in operation. Even 2015, as the U.S. sector was being squeezed by low prices, saw the total count hovering near two-thousand,
The increase is coming hot on the heels of the OPEC production deal, and seems to be in direct correlation with the OPEC announcement of nearly 900,000 bpd in cut production this month. For now, markets are happy, but underlying fundamentals remain as they were: cut production in Saudi Arabia and elsewhere will be made up by a resurgent American sector.
Last month, ExxonMobil paid $6.6 billion in order to double its exposure in the Permian, the single largest domestic U.S. oil deal since the price collapse in 2014,
Austin-based Parsley Energy has been
That looks better when compared to other recent Permian purchases, where land is going for as much as $60,000/undeveloped acre, according to
Bloomberg is predicting the steep prices in the Permian will drive away some investors and trigger a backlash. Companies without a foothold will look elsewhere. This thinking explains why Exxon and Parsley made such big grabs, before prices really got out of control.
But for those with the wherewithal, the Permian pays off better than any other field. Occidental Petroleum Corp., which thinks of the Permian as its “growth engine,” has indicated its keeping its primary focus on its 2.5 million acres there, where production costs are so low a price threshold below $40/barrel still assures profitability. The Permian’s so rich, one Occidental exec noted to
Other companies that are focused entirely on the Permian, like
The high price of getting into the Permian may be offset by the relatively low costs of producing there, as well as the abundance of oil and natural gas that await almost any driller who sinks a well. But if the land rush is in fact over, and attention swings elsewhere, the surge in Permian activity may slacken. That, of course, may be affected if the current bullish swing in prices comes to an end, and if analysts’ predictions of a