On June 19, I wrote about my belief that we would see the U.S. drilling rig count level off and even begin to fall slowly as U.S. producers readjust their drilling budgets for the 2nd half of 2017. The rate of increase in the rig count has been slowing for several weeks as these budget adjustments began to kick in, and this week’s single-rig decrease is a sign that the overall count may have peaked or is close to doing so for the remainder of 2017.
This is a good thing for the future of oil prices, because the U.S. shale industry had heated up so rapidly over the first six months of the year that a cooling off period as become needed. The rapid rise in overall U.S. oil production had inhibited the effort by OPEC and Russia to re-balance global supply and demand and greatly diminished investor confidence in the commodity. If Friday’s slight decline does signal a peak or near-peaking of the rig count, that will serve as a bullish price signal in coming weeks and months.