Baker Hughes US oil rig counts see the first quarterly decline since 2020Q3
- Total US rig counts declined in 2023Q1.
- The US is now the largest crude oil supplier to the EU.
- WTI Midlands oil shall be included in Brent benchmark.
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Baker Hughes, the global oil field services major, published its latest statistics on rig counts earlier today.
Active drilling rigs fell to 755 from 758 in the previous week, which also includes natural gas drillers.
Rig counts were up by 82 compared to April 1, 2022, a 12% increase.
Oil rigs slid by 1 to 592 while gas rigs declined by 2 to 160 for the week.
During the month, total rigs ticked higher by 2 which was the first monthly rise since November of last year.
In Q1, the total rig count was down by 24 which marked the first quarterly drop since 2020 Q3.
The fall in rig counts followed the lower price of crude oil this month which discouraged suppliers.
Owing to the fall in rig counts, US production levels were down by 100,000 bpd this week.
However, the Energy Information Agency (EIA) reported that full-month production in January rose to its highest in nearly 3 years, registering 12.462 million barrels per day on average.
In Canada, rig counts declined by 26 from last week to 139, but the international region saw an uptick of 14 to 915.
In addition, the international rig count is 102 higher than in February 2022.
US Natural gas production reached 98.6 bcfd during March 2023 but is expected to decline with warm forecasts ahead.
Owing to disruptions since the Ukraine war, the US is now the largest oil producer in the world.
US flows account for 18% of Europe’s crude imports, thus, displacing Russia as the largest supplier.
Compared to January 2022, US exports were not even 13% of the total, paving the way for a strong energy relationship in an increasingly polarized global market.
WTI included in Brent pricing
The increasing importance of the USA in global oil flows has become evident from the recent decision of S&P Platts to incorporate US WTI Midlands into Brent pricing.
Although Brent is used as the benchmark for two-thirds of the world’s oil today, Daniel Yergin, Vice Chairman of S&P Global, stated,
…(it) will be more meaningful, significant and have stronger foundations (with the inclusion of WTI).
At present, Brent is only based on five North Sea crudes which peaked at the turn of the century and have been experiencing a loss in production over a prolonged period.
The inclusion of US oil into the benchmark will be a first from outside the region and will be facilitated through 11 U.S. Gulf Coast terminals. The terminals will be capable of cumulatively storing 75 million barrels.
In trading today, prices headed higher following depleted US reserves and tighter supplies from Iraq.
At the time of writing, Brent is trading $79.77 and WTI is at $75.67.
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