Rig counts are a highly imperfect guide to future oil production but they are one of the few readily available statistics on oilfield activity so it is unwise to dismiss their importance entirely.
John Kemp is a Reuters market analyst. The views expressed are his own
LONDON, Jan 27 (Reuters) - Rig counts are a highly imperfect guide to future oil production but they are one of the few readily available statistics on oilfield activity so it is unwise to dismiss their importance entirely.
The sharp drop in crude oil prices since June 2014 and associated fall in rig counts published by state regulators and service companies such as Baker Hughes has sparked a lively debate about the short-term outlook for U.S. oil production.
Some analysts have forecast the drop in rig counts will cause production to peak in the first six months of 2015 then begin to fall in the second half of the year. I count myself in this camp.
Other analysts predict production will remain steady or continue to grow, albeit much more slowly than the 1 million barrel per day (bpd) increases recorded in 2013 and 2014.
In practice, the differences are smaller than the two sides imply. Most forecasters put the change in daily production between December 2014 and December 2015 at less than 250,000 bpd, whether up or down.
For example, the U.S. Energy Information Administration (EIA) predicts output in December 2015 will be just 90,000 bpd higher than in December 2014 ("Short-Term Energy Outlook" Jan 2015).
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