Crude prices edged higher for the second consecutive month on signs that physical markets were tightening. OPEC+ provided additional support, as the cartel presses on with supply cuts to boost prices. In February, Brent jumped 4% to average $83.48/bbl, while WTI was trading for $77.25/bbl, a 4% increase. Futures contracts in February were moving into backwardation, suggesting tighter supply, as near-term barrels traded at a premium to longer-dated shipments. Oil has gained 6% this year, but has yet to break decisively higher. The impact of OPEC cuts, as well as unrest over conflict in the Middle East and Ukraine, has largely been offset by ample output from sources outside the cartel.
U.S. natural gas prices hit a 3½ year-low in February on weak fundamentals, despite LNG supply outages in the U.S. and Norway, countered by weak demand in Europe and Asia. Natural gas spot prices plummeted 46%, down to $1.72/MMBtu, compared to $3.18/MMbtu in January. The 12-month running average at HH continued to decline, down to $2.47/MMBtu, despite optimism for higher prices this year, based on a price spike in January ($3.27/MMbtu). That was the first-time gas had traded above $3.00.MMbtu since January 2023, when HH averaged $3.27/MMbtu.
U.S. rig count. U.S. drilling activity reversed its downward trajectory in February, with the count jumping two rigs for a monthly average of 622. Since bottoming at 616 the week of Nov. 10, 2023, U.S. activity essentially stabilized at approximately 622 rigs for the subsequent 12 weeks. The overall Texas count was down five rigs to 301, with a six-unit loss reported in District 8, down to 165. District 6 dropped four rigs to 20, while District 4 slumped three rigs, down to eight. On a positive note, Texas District 7C gained six-rigs to average 34, while New Mexico and Pennsylvania both gained three rigs to average 101 and 23, respectively
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. In February 2024, there were 4,483 DUCs in the U.S., 290 less than reported in February 2023 (4,773). Over the last year, the build in oil-dominated DUC inventories has moderated noticeably, with four of the seven regions showing y-o-y declines. The Bakken, Eagle Ford, Permian and Anadarko regions experienced y-o-y declines of -44%, -18%, -15% and -5% in their DUC inventories, respectively. However, large year-over-year gains were reported in gas-dominated regions including Appalachia, where DUCs were up to 805 (+26%); the Haynesville shale reported 764 (+14%), while the Niobrara count was up just five DUCs to 656 (+1%). These three regions account for 50% of the total U.S. DUC inventory.
International rig count. Drilling activity outside the U.S. improved noticeably in February, with the international rig count averaging 1,163, 47 more than the 1,116 units working in January. The increase was due primarily to a 37-rig gain in Canadian activity (198), in addition to an improvement in onshore drilling in the Middle East, up 11 rigs to 302. WO
CRAIG.FLEMING@WORLDOIL.COM