In an effort to see where we might be in terms of rig count movement, consider the following facts and anecdotes. Since the rig count began to decline at the beginning of March (when the price war started), we have lost 57 of the rigs drilling in the US. Most of the adders of budget cuts put that number at around 50. To that, add the fact that oil supply cuts are beginning to eat into storage levels (Figure 1) as demand begins to slowly rise from the low point. In China, there is a lower capacity utilization in public transport and higher than pre-Covid-19 levels of traffic on the roads suggesting that avoidance of close spaces could lead to stronger gasoline demand. These factors have pushed WTI prices to just over $30/bbl as of this writing. So, from a very high level we expect to be moving into a period of smaller rig declines. In addition, it is likely that we won’t see oil from these rigs right away as we expect increases in the number of DUCs.
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