A survey of U.S. exploration and production activity shows activity moving in the opposite direction from crude oil prices. File photo by Christopher Halloran/Shutterstock
Nov. 3 (UPI) -- While higher than last year, a survey of U.S. exploration and production activity in October suggests the sector may go into hibernation during the winter.
The analytics division of commodity pricing group S&P Global Platts recorded 1,033 rigs in active service in the United States last month, down about 1 percent from the previous month.
Rig counts serve as a metric for activity geared toward exploration and production and serve as a loose barometer to gauge sector confidence. Rig counts plummeted last year under strains from lower crude oil prices, but have since recovered on improved market conditions.
The price for West Texas Intermediate, the U.S. benchmark for the price of oil, was near $55 per barrel early Friday, up by almost 23 percent from this date last year. The October rig count is up 62 percent from last year.
Crude oil prices have been rallying for most of the quarter, with very few day-to-day declines recorded over the past few weeks. U.S. markets were idled by hurricanes for part of last month, though Trey Cowan, an industry analyst at Platts, said he was surprised market forces weren't enough to bring net gains in exploration and production.
"Where the rigs have gone idle of late is interesting because the changes fly in the face of what has happened in the commodities markets," he said in the emailed report. "For example, it was rigs drilling for oil that showed some weakness during the past month, despite prices for West Texas Intermediate crude oil having generally improved."
Drilling services company Baker Hughes offers weekly snapshots of rig activity. For the week ending Oct. 27, Baker Hughes reported 888 rigs working inland in the United States, a drop of 9 percent from the previous week. Total offshore rigs were static.
For October, Platts counted 994 rigs working inland, a loss of 1 percent from the previous month, and 31 rigs in the Gulf of Mexico, a 6 percent drop, though offshore rig counts were likely impacted by hurricanes. The government said that about 92 percent of the total Gulf oil production and 77 percent of the natural gas production was offline because of the impact from Hurricane Nate at the peak.
"Over the coming winter we would not be surprised to see a continued seasonal flattening of rig activity as the holidays and the exhausting of yearly capital budgets tend to take a toll," Cowen said.
Federal data show total crude oil production in August, the last full month for which data are available, was 0.3 percent lower than July.