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With Brent and WTI above $40/B since mid-April this has been enough to spur a mini-revival in the US rigcount. Since bottoming out at 316 in late May, the number of active drilling rigs targeting oil has risen in 11 of the last 12 weeks to stand at 406 on 19 August – though this 30% gain looks very modest when set aside the peak rigcount of 1,609 hit in October 2014 (see chart 1).
On the back of this increased drilling there are initial indications that US crude output may finally be close to bottoming out. Latest provisional US production data show crude output falling by a further 180,000 b/d in July to 8.57mn b/d, down 859,000 b/d year-on year and some 1.12mn b/d below the April 2015 peak. The US government’s Energy Information Administration (EIA) expects output to have fallen by a further 120,000 b/d this month but that it will bottom out at 8.29mn b/d in September. And, whilst output from US shale formations is still falling, September’s projected fall of 85,000 b/d (to 4.47mn b/d) is the lowest this year. Meanwhile, the EIA’s forecasts for 2016 and 2017 in its latest Short Term Energy Outlook are up by 120,000 b/d and 110,000 b/d on those made the previous month (see chart 2).
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