Despite record-high Chinese oil demand (17.1 MMbopd), a war in the Middle East and sustained production cuts by Saudi Arabia and Russia, benchmark crude prices fell in October, with Brent down 3%, trading at $90.78/bbl, while WTI declined 4.2% to average $85.64/bbl. The drop in crude prices comes after substantial price increases in August and September, fueled by reductions by OPEC+. Prices are expected to remain under downward pressure, after Brent futures slumped $8/bbl, as the global economic outlook deteriorated and supply fears following the Hamas attack on Israel subsided.
U.S. rig count. U.S. drilling activity continued on its downward trajectory, with the rig count losing eight in October, down to 623, after plummeting 16 in September and 25 in August. The largest decline occurred in Texas, which was down six to 304, with a four-rig loss reported in District 7C (20). One-rig reductions were reported in North Dakota (30) and Oklahoma (37). Texas RRC District 4 bucked the overall trend, gaining three rigs, up to 11.
U.S. oil production continued to rise despite a sustained reduction in drilling activity. Since the week of Dec. 2, 2022, the U.S. rig count declined 44 consecutive weeks, before bottoming at 619 on Oct. 6, 2023. The 165 rig-loss represents a 21% reduction in total U.S. drilling activity over the 10-month period. Despite the alarming trend, U.S. oil production reached an all-time high of 13.1 MMbopd in October, surpassing its previous record set in September by 53,000 bopd. Combined with NGL output, crude and condensate production was at an all-time high in October (API). According to major operators present at SPE ATCE, held Oct. 16-18, the inverse correlation documents the positive effects of technological advancements and improved efficiencies in U.S. shale operations.
U.S. natural gas spot prices recovered in October, as new U.S. LNG exporting facilities came on-line. The onset of colder winter weather also factored into the price increase. The commodity at Henry Hub was trading at $2.98/MMBtu in October, compared to $2.64/MMbtu in September. Despite improved prices, the 12-month running average at HH plummeted 7% in October, down to $3.02/MMBtu, documenting the protracted decline since August 2022, when operators were receiving $8.81/MMBtu.
Drilled but uncompleted. Despite a substantial reduction in U.S. drilling activity, the DUC count is slightly higher on a y-o-y basis. In October 2023, there were 4,524 DUCs in the U.S., 116 more than reported in September 2023 (4,408). However, over the last several months the build in the DUC inventory has moderated, with four of the seven regions showing y-o-y declines. The Eagle Ford, Permian, Bakken and Anadarko regions experienced y-o-y declines of -31%, -23%, -29% and -1% in their DUC inventories, respectively. However, year-over-year gains were logged In the Niobrara region, where DUCs are up to 736 (+78%); Haynesville reported 751 (+38%; and the Appalachia count reached 747 (+30%).
International rig count. Drilling activity outside the U.S. slipped slightly in September, with the international rig count averaging 1,128, 13 fewer than the 1,141 working in August. However, the Canadian count was down just one rig, to average 188 in September, as elevated crude prices continued to support onshore activity. The majority of the loss was due to a 12-rig decline in offshore drilling, with Norway losing five rigs down to 17, and the Middle East suffering a three-rig loss (43). WO
CRAIG.FLEMING@WORLDOIL.COM