Guest Post by Art Berman at The Petroleum Truth Report
The U.S. rig count increased by 19 this week as oil prices dropped below $48 per barrel–the latest sign that the E&P industry is out of touch with reality.
Getty Images from The New York Times (July 26, 2015)
The last time the rig count increased this much was the week ending August 8, 2014 when WTI was $98 and Brent was $103 per barrel.
What are they thinking?
In fairness, the contracts to add more rigs were probably signed in May and June when WTI prices were around $60 per barrel (Figure 1) and some felt that a bottom had been found, left behind in January through March, and that prices would continue to increase.
Figure 1. Daily WTI crude oil prices, January 2-July 24, 2015. Source: EIA and NYMEX futures prices (July 21-24).
Even then, however, the fundamentals of supply, demand and inventories pointed toward lower prices–and still, companies decided to add rigs.
Continue reading “Rig Count Increases by 19 As Oil Prices Plunge–What Are They Thinking?”
