The decline in oil rigs in use in the US this week - a key gauge of likely production trends - helped push oil prices up sharply on Friday, though the lower reading may have been affected by localized rule changes in Oklahoma.
The US benchmark crude, West Texas Intermediate, was up $1.78 at $62.11 per barrel in late trading, which helped it avoid another week of losses following a recent 10 per cent sell-off from the February highs. The market had been recovering from June through January as cuts by Opec and other producers supporting the cartel. But surging US output - spurred on by the higher oil prices - but the brakes on the market.
The Baker Hughes weekly rig report for North America had supported the case that US oil output, especially from the shale oil producing regions was rising relentlessly. But Friday's report showed the first drop in two months in oil rigs in use, down 4 at 796. The net drop was due largely to a decline of 6 rigs in the Cana Woodford basin, a shale oil producing part of Oklahoma where the SCOOP and STACK plays are located.
The big players in the area are Continental Resources Inc. and Newfield Exploration Co.
The drop in rig count in Cana Woodford might be linked to last month's move by the Oklahoma Corporation Commission to tighten fracking rules, industry sources reckoned.
The commission compelled explorers within certain areas (including SCOOP and STACK) to use a seismic array to detect movement underground, at the same time lowering the quake threshold for pausing work from 3.0 magnitude to 2.5. The mandated delay in the event of the threshold being reached is at least 6 hrs.
Meanwhile, the prolific Permian Basin, which straddles Texas and New Mexico, saw its rig count rise another 2 last week, continuing its long streak of growth.
(First Oil reports are produced by MT Newswires' global team of oil reporters. This story is also disseminated in real time to energy industry professionals via the First Oil Chat service on the ICE Instant Message application.)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Copyright (C) 2016 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
