The closely-watched U.S. rig count–which comprises U.S. onshore and U.S. offshore Gulf of Mexico drilling rigs – hit 971 in April, up 107 percent from last year, according to Platts RigData. U.S. production is at its highest since August 2015.
“U.S. rig rates have now increased to levels that will allow production growth,” said James Davis, upstream analyst at consultancy FGE.
“We see it inevitable that OPEC will have to extend its cuts a further 6 months if not longer. Latest stocks data indicates that there is unlikely to be a significant stock draw through the first half of 2017, which is one of the main indicators that OPEC will be looking at when they meet next to decide what action to take.”
Commercial U.S. crude inventories in the week to April 28 fell by 0.9 million barrels, marking the fourth week of declines. Stockpiles still stand at a near-record 527.8 million barrels and well above the five-year range.
“It seems the frackers have more influence on pricing at this point than OPEC does,” said CNBC contributor Anthony Grisanti, founder and president of GRZ Energy.
However, Grisanti and survey respondents with a more constructive view on oil suggested U.S. production may be closing in on a near-term peak.
“While fracking has come back I don’t see production from them increasing much more from these levels–banks won’t finance those operations like they used to–and as the price falls some of those new wells become unprofitable once more.”
Grisanti expects oil to average between $50 to $55 this summer.
Christopher Haines, head of Oil & Gas, BMI Research, also predicted U.S. output may start levelling off.
“US production will grow, though likely not as strongly as many people are expecting. While drilling has been strong, we have yet to see the same level of activity in completing wells, which will limit the aggressiveness of growth.”
Consultancy Energy Aspects–the most bullish forecaster in the CNBC survey–said the markets were too fixated on U.S. stockpiles and needed to consider inventories on a global basis.
“We expect fundamentals to improve over Q2, but the path to rebalancing may not be fully clear for the market without some data cleansing,” said Miswin Mahesh, chief oil analyst at Energy Aspects, who expects Brent prices to average $63 this quarter.
“Overall for Q2, our balances show a stock-draw of 1.2 million barrels a day. We expect North American supplies to grow 600,000 barrels a day year-on-year in Q2, but this is offset by fall in supplies elsewhere in non-OPEC.”