Not unexpected, but rig count is down

As of this week, the rig count decline is nearing the decline of 2015. It fell about 10 rigs per day this week and in 2015-2016, it fell about 12-15 per day. New Mexico alone had 100 rigs on April 3 and the current total is 84; Texas’ District 8 went from 221 to 174 during the same period.

According to Enervus, cracks are appearing in Saudi Arabia and Russia’s willingness to continue their price war amid the new coronavirus outbreak that has slammed global markets and demand. U.S. President Donald Trump said he would meet with both parties to make an agreement that would significantly lower oil output, with cuts as large as 15 million barrels but there was no indication if that was per day, and no time frame was given.

Enervus also reported that the Russians and Saudis denied having spoken to one another, but later in the day Saudi Arabia called an urgent meeting of OPEC, including Russia, to seek a “fair agreement that will restore the desired balance to the oil markets,” the Saudi Press Agency said.

Much like in past agreements, Saudi Arabia’s participation is contingent upon other major producers making cuts themselves. The kingdom is currently producing around 12 million barrels of oil and could be willing to cut that to below 9 million bbl/d, according to a Saudi official.

Markets reacted positively to the news, with the WTI front-month contract settling 25% higher on April 16 at $25.32/bbl. WTI has kept these gains and currently trading at $27.38/bbl ahead of today's meeting.

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