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Global Energy Advisory 14th July 2017

Oil

Growth in U.S. shale oil output might slow down in 2018 as oilfield service providers are finding it hard to respond to booming demand for their services, the head of business development of Halliburton, Mark Richard, said at the World Petroleum Congress that took place this week in Istanbul.

Richard said he expected the number of active drilling rigs in the United States to hit 1,000 by the end of this year, but after that their number will either remain flat or start declining: a rig count of 800-900 is more sustainable, Richard said. Last week, the rig count, as reported by Baker Hughes, hit the highest in more than 24 months, at 763.

Many see the increase in the number of U.S. rigs despite weeks of price drops of both WTI and Brent benchmarks as a sign of U.S. shale’s resolve in the face of a low-priced oil market. Others see it as a 3- to 6-month lag between prices and active rigs.

Oilfield service companies in the U.S. have enjoyed a comeback with a vengeance since oil prices first ticked above $50 a barrel, after having to spend the last couple of years offering discounts and slipping into the red, many barely surviving and many going under. Now demand for drilling equipment and services is back and oilfield service providers are raising their prices, shunning some jobs for lack of workforce and equipment, and basically turning the tables on oil and gas producers.

Prices, however, have been easing off in the last few weeks and unless something…

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