US output to fall by 255,000 bpd from Q2-Q4 2015 said Goldman Sachs
Oil prices rise as US drilling declines
LONDON, September 21, 2015
Oil rose by more than 1 percent on Monday after data showed US drilling slowed and a report said $1.5 trillion worth of planned production was uneconomic at current prices.
Crude has halved in value over the last year as soaring global production overwhelmed slowing demand and the much lower prices have now begun to hit drilling, particularly in the US.
US drillers have cut the number of rigs in operation for three straight weeks.
Global benchmark Brent crude oil was up 60 cents at $48.07 a barrel. US crude oil futures were trading at $45.38 per barrel, up 70 cents.
"The fall in rig counts (is) supporting an otherwise bearish market," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Investment bank Goldman Sachs said in a report that rig data pointed to a decline in US oil production between the second and fourth quarters of this year of more than 250,000 barrels per day (bpd).
Analysts said low prices would have a bigger impact in the longer term as US producers struggled to cut enough costs.
"While operators are seeking an average cost reduction of 20-30 percent on projects, supply chain savings through squeezing the service sector will only achieve around 10-15 percent on average," energy consultancy Wood Mackenzie said.
"$1.5 trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel," Woodmac added.
Despite such a cut to US spending plans, analysts said prices were expected to remain at low levels for some time as other producers, especially in the Middle East and Russia, kept pumping near record levels.
"Oil producers continue to battle for market share ... widening the global oil surplus," ANZ said.
The bank said it expected US crude to fall below $40 a barrel over the next six months and to average just $41 next year. It expects Brent to average $46 per barrel in 2016. --Reuters
