Scraping the bottom

“Scraping the bottom” is hardly ever a good thing for a business. But for the US oil and gas industry, it could be the best news in nearly a year.

After 28 straight weeks of decline that saw the US rig count fall by more than 50pc since the peak touched in 2014, the world’s biggest oilfield services companies see tentative signs of recovery that may lead to a modest rise in drilling in the second half of 2015. 

The world’s biggest oilfield services provider Schlumberger sees that “tentative signs of change are emerging” as the plunge in crude prices slows supply growth and demand improves.

Output outside of North America and the producer group Opec has already weakened by 650,000 b/d in the first half of the year. A further softening is expected in the second half, driven by Brazil and Mexico “as the low investment levels in many regions start to take full effect,” Schlumberger chief executive Paal Kibsgaard said.

Halliburton, the world’s second-largest oilfield services provider, said it doesn’t expect the recent 20pc-plus pullback of Nymex WTI from the peak touched in May to change US shale oil producers’ outlook. “Over the last three weeks it hasn’t changed that much,” chief executive Dave Lesar said. “So I would describe where we are today as scraping along a bottom.”

A clear consensus has not emerged on where the bottom is, or whether it is indeed being scraped. Baker Hughes, the world’s third-largest driller, was more circumspect about the outlook. “In North America, we don’t anticipate activity to increase while commodity prices remain depressed as the seasonal activity rebound in Canada will likely be offset by a decline in the US,” said chief executive Martin Craighead. “Internationally, rig counts are projected to continue to decline led by many offshore and shallow water markets.”

Another sign of a troubled outlook comes from investment bank Morgan Stanley, which said the current oil market crash may rival 1986 in its severity.

“We have been expecting the current downturn to be as severe as the one in 1986 – the worst for at least 45 years – but not worse than that,” it said.

“Still, if oil prices follow the path suggested by the forward curve, our thesis may yet prove too optimistic.”

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