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Oil-drilling rigs still running strong

Crude production keeps busy pace despite price drop

The Columbian
Published: December 6, 2014, 12:00am

SAN FRANCISCO — The boom in U.S. oil production will live to see another week.

The nation’s crude explorers, engaged in a pricing war with the world’s largest suppliers, defied predictions of a drilling slowdown and ran the most rigs since mid-November, boosting the U.S. count by three to 1,575, Baker Hughes said on its website Friday. Rigs drilling for natural gas were unchanged at 344, the Houston-based field services company’s website showed.

The number of U.S. oil rigs has fallen from the 2014 peak of 1,609 amid a global surplus of crude that has dragged prices down by more than $45 a barrel and threatens to slow the nation’s unprecedented shale boom. OPEC decided last week to maintain production, placing more strain on U.S. oil producers that have some of the world’s highest drilling costs.

“There’s just so much momentum built up in the system right now and a lot of projects have already been funded,” Kurt Hallead, co-head of RBC Capital Markets’ global energy research team, said by telephone from Austin, Texas. “There are some projects that will continue on into the next quarter. Right now, you’re seeing the smoke, and you won’t really see the fire until about the second quarter.”

Future output in the U.S. is at risk with oil trading below $80 a barrel, Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., said in an interview on Bloomberg Television Dec. 1. “Below $60 creates a lot of pain for both” the U.S. and OPEC, he said.

The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the world’s oil supply, decided Nov. 27 to maintain its collective crude output target at 30 million barrels a day, resisting calls for cuts to shrink the excess in global markets.

The international benchmark North Sea Brent oil and the U.S. counterpart West Texas Intermediate crude both slid below $70 a barrel after OPEC’s decision. Brent for January delivery fell 57 cents Friday to $69.07 on the London-based ICE Futures Europe exchange. WTI dropped 97 cents to $65.84 on the New York Mercantile Exchange. Both settlements were the lowest in more than five years.

The nation’s 52 largest U.S. exploration and production companies are running about 92 horizontally drilling rigs in North Dakota’s Bakken formation, Hallead said. At $60 oil, that count would shrink by almost half next year, he said.

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