Crude prices fell in May despite a 1.16-MMbopd reduction by OPEC+ in April, and a 503,000-bopd cut by Saudi Arabia and Russia in May. WTI fell 10%, to average $71.58/bbl in May, while Brent traded at $75.47/bbl, down 11% compared to April. While demand continues to grow, supplies are keeping up comfortably, thanks to a swell of investment. Prices are expected to face more downward pressure in the coming months, as supplies from Russia and Iran prove surprisingly resilient. The catastrophic decline in U.S. natural gas prices shows no sign of abating, with the commodity at Henry Hub down $6.66/MMBtu since August 2022 ($8.81/MMBtu), to average $2.15/MMBtu in May.
U.S. rig count. The decrease in crude prices is starting to negatively impact U.S. drilling, with the rig count dropping 24 units to average 728 in May. The overall Texas count was down 14 rigs to 363, with RRC District 2 losing nine rigs down to 22. The Permian’s District 8 suffered an eight-rig decline to 196, while District 4 lost four rigs to average 12 in May. Oklahoma was also on the minus side of the equation, dropping five rigs down to 51.
Texas RRC District 1 was on the positive side of the equation, with operators working the Eagle Ford adding three rigs up to 31. In gassy District 6, drilling activity was up four to 35, despite nine consecutive months of commodity declines at HH.
Drilled but uncompleted. Despite depressed U.S. natural gas prices, operators continue to drill in gas-dominated regions driving the DUC count higher. In May 2023, there were 4,834 DUCs in the U.S., 585 more than the 4,249 tallied in May 2022. In recent months, the build in the DUC inventory has slowed, but there are large y-o-y gains still being reported in multiple shale basins. In the Niobrara region, DUCs are up to 717 (+128%), Haynesville has 761 (+76%), Appalachia has 710 (+43%) and the Bakken has 539 DUCs in inventory (+27%). These four regions account for 56% of the total U.S. DUC count. On a positive note, the Permian and Eagle Ford experienced y-o-y declines of -30% and -20% in their DUC inventory, respectively.
International rig count. Similar to past months, drilling outside the U.S. remained relatively steady with the exception of Canada. In April, the international rig count averaged 1,056, 70 fewer than the 1,126 working in March. The decrease was attributed mainly to an 87-rig decline in Canada, due to spring thaw. This decrease was partially offset by a 14-rig gain in the Middle East (337) and a 10-rig upturn in onshore activity in the Asia-Pac region (219). WO
CRAIG.FLEMING@WORLDOIL.COM