Last week’s US oil-rig count signaled a shift for the energy industry.
Data from the driller Baker Hughes showed that the oil-rig count fell by just one. Though it was the 24th straight week of a decline, it was the slowest pace seen during this streak.
In a note published Friday, Goldman Sachs’ Damien Courvalin and Raquel Ohana further point out that the horizontal oil-rig count actually increased by four, the first such weekly increase since November 26.
This is a sign drillers are starting to change their behavior following the oil-price crash, which forced companies to shut down money-losing oil-production projects.
“We believe that should West Texas Intermediate crude oil prices remain near $60/bbl, US producers will ramp up activity given improved returns with costs down by at least 20%,” the Goldman analysts said. “Last week’s rig count is a first sign of this response and suggests that producers are increasingly comfortable at the current costs/revenue/funding mix.”
They assume that production will fall slightly through the second and third quarters before picking up in 2016 at the current rig-count level, which could turn positive in the coming weeks.
On Tuesday morning, WTI was down by less than 1% at about $59.31 a barrel.
This chart shows Goldman’s forecasts of US production at the current rig-count level:
And here’s the chart of the decline in the rig count, which is starting to flatten ever so slightly:
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