2 February, AtoZForex.com, Lagos – The oil glut which has driven crude oil prices down to 12-year low may be easing as producers begin cutting down on production. Global rig activity may dip as much as 30% this year, according to Baker Hughes, one of the world’s largest oil field services companies. Goldman Sachs also predicted the fall of crude oil prices to $20 in 2016.
Falling rig counts
Data last week showed that energy firms in the US have cut oil rigs counts for the sixth consecutive week, with further cuts expected as U.S shale companies slash budget on the falling crude oil prices. By the end of the week, Jan. 29, drillers have removed 12 oil rigs, reducing the rig count to 498, the lowest since March 2010. A significant change, similar to this time last year, the rigs count was 1,223. In 2015, oil rigs were cut at an average rate of 18 rigs per week, putting the total cut to 963 oil rigs for the year, marking the largest annual fall since 1988. Also, US biggest shale oil basin located in west Texas and eastern New Mexico, Baker Hughes pointed that drillers cut 16 rigs last week, the most rigs cut in a single week since April 2015, to 179. The lowest number of rigs in the formation since 2011. Active rigs in the Bakken in North Dakota also dipped to its lowest level since 2011 with just 44 active rigs.
Falling oil rigs to reduce oil glut?
This may be a necessary setup for the recovery of crude oil prices as supply will gradually fall. Back in 2014 when crude prices were around $100/barrel, Presidential candidate Bernie Sanders argued that “The fact is that high gasoline prices have less to do with supply and demand and more to do with Wall Street speculators driving prices up in the energy futures market.” This claim is clearly wrong in today’s conditions as many regard the oversupply of oil as the culprit for falling prices. Crude prices have been moving in a range in recent weeks after bouncing off 12-year low at $27/per barrel. The trend ended last week somewhat higher and has resumed the new week to another fall.
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