RE:RE:RE:RE:RE:understanding rig count?This theory seems plausible when you look at the rig counts overlayed with the US production. Between 2010 and 2015 the US rig counts went from about 400 to 1600 ie . an increase of 400%.
During the same time period the US oil production went from 5 MBOE to about 9 MBOE a less then 200% increase.
So over that time it took 4 times the rigs to get less then 2 times the production. Now we are back to 400 rigs thats 4 times fewer then at the end of 2014. This number of rigs on the same year resulted in 5 MBOE in production 4 MBOE less then today.
An oversimplification given the lag time between rig count and production but 1200 fewer rigs should zap production over the next year by at least 3 MBOE.
The uncertanities of Iran's barrels plus advanced technology over the last 2 years that can increase production in some wells by 300% are wild cards amoungst hundreds of more wildcard factors including on the demand side of the equation. I don't think it's safe to long oil, equtites especially leveraged ones, until we see an acceleration of US production declines. For the last 6 months US production has been in the 9,2 MBOE range plus or minus rounding errrors.
If the drilled capped well inventory has been depleted over 2015 and that was the reason for the resilance in production in the last half of 2015 then we should expect to see acceleration in the drop of US supply. The data points do not show that deceleration yet and while some question the numbers that's what the market watches and that is the result of the sum of all the unknowns.
Simply looking at US rig counts versus prior US production there should be a subatantial upcoming acceleration in US supply declines. That's what I'll be looking for but for now the fundamental and technical trend is still to go short.