Tags: goldman | oil | rig | output

Goldman Says US Oil-Rig Slump Not Enough to Halt Output Growth

Monday, 16 Feb 2015 12:46 PM

The decline in the number of rigs drilling for oil in the U.S. to the fewest since August 2011 is still not enough to halt production growth, according to Goldman Sachs Group Inc.

Lower oil prices may be needed to balance the market because U.S. output could still expand by 600,000 barrels a day in the fourth quarter compared with a year earlier, Goldman analysts Damien Courvalin and Raquel Ohana said in a note Monday. The U.S. pumped 9.23 million barrels a day in the week to Feb. 6, the most in weekly Energy Information Administration records dating back to January 1983.

In response to a plunge in oil prices, drillers in the U.S. idled 519 rigs in the past 10 weeks, a 33 percent reduction, according to Baker Hughes Inc. U.S. production continues to grow because of improvements in technology that are offsetting companies’ spending cuts, Goldman said. While West Texas Intermediate crude, the U.S. benchmark, has rebounded about 20 percent since Jan. 29, it is still less than half last year’s peak of $107.73 a barrel.

“The rig count decline is still not sufficient, in our view, to achieve the slowdown in U.S. production growth required to balance the oil market,” Goldman said. “Oil prices need to remain lower in the coming quarters in order for the announced capex guidance and rig reduction to materialize into sufficiently lower production growth.”

Crude prices fell in part because of a U.S. oil boom, driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from shale formations including the Permian and Eagle Ford in Texas and the Bakken in North Dakota. The Energy Information Administration forecast U.S. production will increase 7.8 percent to 9.3 million barrels a day this year, the most since 1972.

The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world’s oil, refused to cut output in November to reduce a global surplus, saying instead it would defend its market share against higher-cost producers. Oil prices are recovering faster than expected and the global supply surplus is less than the 1.8 million barrels a day previously estimated, Kuwait Oil Minister Ali Al-Omair said at an industry conference in Kuwait City Monday.


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The decline in the number of rigs drilling for oil in the U.S. to the fewest since August 2011 is still not enough to halt production growth, according to Goldman Sachs Group Inc.Lower oil prices may be needed to balance the market because U.S. output could still expand by...
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Monday, 16 Feb 2015 12:46 PM
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