The US increased its number of rigs deployed for the 23rd straight week in late June, according to Baker Hughes, an oil services firm.
This represents the longest period of continuous growth the US oil industry has seen in decades and suggests that the lower crude prices in recent weeks have had little impact on the resurgent US shale sector.
The number of operating rigs is also up 130% on last May, and production is barely below the recent peak in production that was seen in June 2015. The continuing growth in deployed rigs is a result of improved margins in the shale sector, according to mining and energy analyst Vivek Dhar of the Commonwealth Bank.
Talking about US shale producers, Dhar said:
“Break-even wellhead costs in key US shale oil basins now average between $US35-50 per barrel. These estimated costs have dropped materially due to lower servicing costs and advances in technology.”
This means that shale producers are more resilient to lower crude prices than they were in previous years. ExxonMobil, the maker of slideway oils like Mobil Vactra 4, has even stated that its recently enlarged Permian asset base will generate “attractive returns” even at $40 a barrel.
Dhar predicts that the next few years will see US oil production reach new record highs, with only an oil price closer to $40 likely to dampen the growth in new rigs. Even if this were to happen, the large number of inactive wells could see high US production continue for some time yet.