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This oil rig count may no longer be relevant

Scott Tong Feb 20, 2015
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This oil rig count may no longer be relevant

Scott Tong Feb 20, 2015
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Today brought another weekly installation of the most closely watched number in the oil patch: the rig count. That’s the measure of how many rigs are currently in operation. The count has fallen 37 percent over last year to 1019 rigs. With oil prices so volatile, Longbow Asset Management analyst Jake Dollarhide says even regular people now watch the rig count.

 But how good of a metric is this? How well does it predict future oil production? Eric Kuhle of Wood MacKenzie has detected a “strong disconnect” between the number of rigs and production. Analysts who see this decoupling says it’s a function of the modern era of extracting oil from shale rock. Kuhle says idled rigs tend to be the less productive ones, leaving the drilling superstars still in operation. Those who see a disconnect suggest the rig count plunge may overstate how bad things are.

Still, Steven Kopits of Princeton Energy Advisors says the rig count has fallen so steeply, production has to fall. It may be a question of how much.

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