For U.S. shale drillers who have seen prices climb almost 50 percent in six months, it’s been largely a rig-less recovery, a conundrum for traders seeking to forecast the future.
Normally, you’d expect the rigs to return to the field in significant numbers as producers flush with added cash looked to boost output. But the weekly Baker Hughes tally has stayed remarkably still.
The reason: Explorers are doing more with less, forcing traders to use a bigger toolbox of stats, metrics and gauges to track U.S. production that’s expected to top 10 million barrels a day as the year progresses.
For the market, the country that’s become the world’s swing producer and a thorn in OPEC’s side is becoming a whole lot harder to read.
The number of rigs drilling for oil in the U.S. is less than half the count in the middle of 2014, when the crude market crash began. And yet, America is set to rival Saudi Arabia and Russia, with production expected to top 10 million barrels as early as next month and to reach 11 million toward the end of next year.
How? The combination of faster and faster horizontal drilling and more intense fracking has allowed production to explode even as the number of rigs drop. Up until about four years ago, it was safe enough to use the rig count to track activity because the industry was more reliant on single vertical wells.
“You’ve got different levers to pull to get increasingly efficient,” James Wicklund, an analyst at Credit Suisse in Dallas, said in a phone interview. “There is not one clear acknowledged reporting source for the metrics that we use. It makes it a little bit murkier.”