Crude prices edged higher for the third consecutive month, as escalating tension in the Middle East triggered supply concerns. OPEC+ provided additional support, as the cartel continued with its supply cuts to boost prices. In March, Brent jumped 2.3% to average $85.41/bbl, while WTI surged to $81.28/bbl, an increase of 4%. Crude markets scored a 16% first-quarter gain, a sign that export curbs by OPEC+ are reining in global supplies. Time-spreads in the futures market swung from bearish contango to bullish backwardated, signaling a tightening physical market.
U.S. natural gas prices continued on a precipitous decline, averaging just $1.49/MMbtu in March, the lowest level recorded by EIA, dating back to January 1997. Natural gas spot prices have plummeted 53% since the first of the year ($3.18/MMbtu) and are down 83% compared to the August 2022 price of $8.81/MMBtu, the month before the Nord Stream subsea pipeline attacks. The 12-month running average at HH declined to $2.41/MMBtu, despite optimism for higher prices this year, based on a price spike in January ($3.18/MMbtu). That was the first-time gas had traded above $3.00.MMbtu since January 2023 when HH averaged $3.27/MMbtu.
U.S. drilling activity was up slightly in March, with the count jumping three rigs for a monthly average of 625. Since bottoming at 616 the week of Nov. 10, 2023, U.S. drilling activity has fluctuated in a narrow range, averaging 623 rigs/week for the subsequent 20 weeks. The overall Texas count was down seven rigs to 294, with a four-unit loss reported in District 8, down to 161, but District 7C rebounded three rigs to 37. In the Eagle Ford play, activity in District 1 was unchanged at 25, but in District 2, activity gained one to 21. Despite record-low natural gas prices, operators working in the Texas side of the Haynesville play in District 6 kept 17 rigs working, just three less than in February. In New Mexico, operators added six rigs (+6%) for a total of 107. Activity in Louisiana, including the Federal Offshore, remained unchanged at 44 with 28 rigs running in the Haynesville district, just two less than reported in February.
Drilled but uncompleted. The sustained lull in U.S. drilling activity continues to cause a reduction in the overall DUC count on a y-o-y basis, but at a slower pace. In March 2024, there were 4,522 DUCs in the U.S., 154 less than reported in March 2023 (-3.3%). Over the last year the tally in oil-dominated DUC inventories has moderated noticeably, with three regions showing y-o-y declines. The Bakken, Eagle Ford and Anadarko regions reported y-o-y declines of -46%, -15% and -6% in their DUC inventories, respectively. However, the Permian reversed course in March and logged a y-o-y increase of 125, up to 866 DUCs, an increase of 16%. Year-over-year gains were reported in gas-dominated regions, including Appalachia, where DUCs were up to 820 (+16%); while the Haynesville play reported 784 (+9%). The Niobrara reported a decline in its DUC count on a y-o-y basis, reducing the tally by 70, down to 649 (-10%).
International rig count. Drilling activity outside the U.S. improved in February, with the international rig count averaging 1,190, 27 more than the 1,163 units working in January. The increase was due primarily to a 34-rig gain in activity in Canada (232), in addition to a five-rig improvement in onshore drilling in Africa, up to 95. WO
CRAIG.FLEMING@WORLDOIL.COM