The US oil industry has passed the downward course in the current business cycle in July and August, with drilling activity expected to start to recover from September or October, according to John Kemp, a commodity and energy columnist at Reuters. He also projected that US oil production would begin to rebound from March or April 2021.
Statistics covering a period of the last three decades showed that a change in crude oil future prices has typically been followed by changes in drilling in the next four to five months and changes in production with an average delay of nine to twelve months. The delays reflect the time that businesses needed to adjust drilling projects and contracts.
Oil prices hit a low 19 weeks ago in April and have risen progressively ever since. Hence, drilling rates are seen to have been near the bottom for the current cycle, or even passed it, the analysts said. Data from oil service provider Baker Hughes showed that 180 oil-directed rigs were active in the US last week, increasing from 172 two weeks earlier. The rig count has been stable in recent weeks after falling by nearly 75% between mid-March and mid-July. The number of active oil rigs is expected to trend upward through the end of 2020.
For now, US oil output is likely to continue turning lower until the end of 2020 or early 2021. However, it is expected to trend higher again after that period. US oil prices have been steady at around $40-45/barrel in recent weeks. If the prices rise to $50/barrel, producers will accelerate further their drilling activity.
