By Rob Nikolewski │ Watchdog.org
After 29 straight weeks of declines, the rig count for U.S. oil and gas operations has gone up for two weeks in a row.
While the reversal is offering some hope the industry’s downturn since last November has finally hit bottom, energy analysts aren’t ready to start popping champagne corks.
“There are just too many variables that can take it higher or lower,” said Tom Petrie, chairman of Petrie Partners, a Denver-based investment banking firm that offers financial advice to the oil and gas industry. “It takes more than a few rigs being put back on to give me conviction that we couldn’t just see a little pause and then another trip down.”
The closely watched rig count for oil and gas fields was up by one Friday in the weekly survey by the Houston-based oil field service company Baker Hughes, inching up from 862 to 863. That came after Baker Hughes reported a net plus of three the previous week.
Oil rigs alone were up five last Friday and 12 the week before.
That snapped a 29-week losing streak, dating back to the decision by the Organization Petroleum Exporting Countries last Thanksgiving to not cut crude production.
OPEC’s decision kept the supply of worldwide oil pumping, resulting in a dramatic drop in global oil and gasoline prices which in turn led North American producers to lose money, cut back production and lay off thousands of employees.
OPEC’s move was interpreted — at least in part — as a way to significantly hurt U.S. shale producers, whose hydraulic fracturing and horizontal drilling techniques challenged Persian Gulf oil giants such as Saudi Arabia for worldwide market share.
While the move into positive territory for rig counts the past two weeks has been small, it’s led some analysts to think the worst may be over for North American producers.
Morgan Stanley Research analyst Ole Slorer got Wall Street buzzing Thursday after releasing a report citing the U.S. rig count reversal as a sign the global oil market may be stabilizing:
That could mean, the report said, that the long-term price of Brent crude — the widely accepted international price — will reach $90 a barrel. Brent futures were trading at $58.76 on Friday.
“From here, we see a very attractive risk-reward on a 6-9 month view,” Slorer’s report to investors said, adding that “green shoots (are) becoming visible.”
That would be welcome news for the oil and gas industry in the United States.
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