Drilling Uptick Set to Continue

Drilling Uptick Set to Continue
Rigzone panelists offer their views on what to watch in the oil and gas markets this week.

(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)

As Rigzone reported over the weekend, the Baker Hughes Co. count of rotary drilling rigs in the United States and Canada showed a solid increase for the past week. A quick review of weekly articles about the industry metric shows the service company has not reported a drop in total rigs since Sept. 11. In the past two months, the overall U.S. rig count has increased 23 percent: from 254 to 312. One of Rigzone’s regular oil and gas market-watchers anticipates the uptick in drilling activity will continue. Read on for more about this and other trends to watch this week.

Tom McNulty, Houston-based Principal and Energy Practice leader with Valuescope, Inc.: I expect more drilling permits to be issued and U.S. production to increase. This means associated gas production will also go up to support winter demand and LNG exports.

Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: The markets will obviously keep focused on the virus and the progress of vaccine testing, certification of the election and the Senate run-off elections in Georgia, which will take place in January.

Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: As western nations experiment with new lockdowns, we will get a sense for the demand impact. This will be balanced by the fact that many lockdowns are less strict than the first phase, and Asia will be supporting demand this time.

Phil Kangas, US Partner-in-Charge, Energy Advisory, Natural Resources and Mining, Grant Thornton LLP: Exuberance from the initial Pfizer/BioNTech announcement of the COVID vaccine may wane. The energy sector led the way in advancing stock prices early last week, in no small part as a result of having lost so much ground from the start of the pandemic. Despite the positive news, surging infection numbers will continue to weigh heavily on economic activity. As the market settles in a more realistic assessment of the timetable needed for vaccine production, deployment and immunity, we’ll be watching how this affects both upstream investment plans, crude prices and market valuation.

With the news of a potential vaccine, a robust stimulus package in the near-term also appears less likely. The energy sector would stand to be one of the top beneficiaries of further government stimulus spending.

The Biden campaign has begun to establish transition teams, though at this writing has not been authorized to initiate such activities by the General Services Administration. Key roles for secretary of interior, energy, Environmental Protection Agency and other agencies may further offer insight into the incoming administration’s executive order plans and policy priorities. A Republican-led Senate may delay or thwart nominees deemed too far from mainstream. As the final Senate numbers begin to settle, we’ll also have more clarity on the level of bipartisanship needed for any dramatic changes in energy policy.

To contact the author, email mveazey@rigzone.com.


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