Everyone is wondering just how low the price of oil can go. The reality is that we now have an oversupply issue, rather than demand erosion from past boom-bust cycles in energy prices.
Before the supply issue gets resolved, the rigs that actually drill the oil are going to have to keep coming down before the domestic supply issue can get more in line with demand and storage capacity. That also means more bad news for the oil and gas sector and its total workforce.
As far as why this matters, the worldwide rig count seen from the Baker Hughes count was under 1,900 in January of 2016, down from over 3,300 in January of 2015.
Baker Hughes announced that the international rig count in January 2016 was 1,045. This is down by 50 rigs from the 1,095 counted in December 2015 and down 213 rigs from the 1,258 rigs counted in January 2015.
The international offshore rig count for January 2016 was 242. That is down eight from the 250 rigs counted in December 2015, and it is down by 72 from the 314 counted in January 2015.
The average U.S. rig count for January 2016 was 654. This figure is down by 60 rigs from the 714 counted in December 2015, but the big drop was seen in that it was down 1,029 from the 1,683 counted in January 2015. The average Canadian rig count for January 2016 was 192. That was actually up by 32 rigs from the 160 counted in December 2015 but is down by 176 rigs from the 368 counted in January 2015.
The worldwide rig count for January 2016 was 1,891. This is down 78 rigs from the 1,969 counted in December 2015, but it is down a whopping 1,418 rigs from the 3,309 counted in January 2015.
Where the real bottom will take place in the rig counts remains up in the air. All the major companies that operate wells and rigs have been lowering their capital spending plans from an already lower 2015 into 2016. Sadly, the industry pressure remains in place, and it seems that this rig count has not reached equilibrium with other supply and demand forces in the oil market.
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