The U.S. oil rig count is at a five year low as struggling oil companies continue to scale back drilling efforts to combat profit gutting global crude prices.
Oil companies have idled 1,172 rigs since 2014. The price of oil has tanked more than 60 percent in the last year, costing oil companies more than $100 billion in planned investments, reports Business Insider.
“The downturn is at 400 days and counting, well over double the previous downturn in December 2008, which was about 150 days,” Geoffrey Cann, national director of oil and gas for Deloitte Australia told the Queensland Petroleum and Exploration Association. “But pricing hasn’t turned around yet, and all the signs suggest that we won’t see a reversal anytime soon.”
Oil prices continued their trend downward Monday, following last week’s tumble to less than $40 a barrel. It was only the second time since the price crisis began that oil fell under $40 a barrel, prompting warnings from industry experts that prices could soon reach new lows, reports Business Insider. Michele Della Vigna, head of European energy research at Goldman Sachs told BBC radio Monday that their analysts say there is a chance oil slips to as low as $20 a barrel.
Struggling oil companies will see little relief, as sinking demand is expected to continue wreaking havoc on the energy industry. A global surplus of oil is also keeping prices pinned down, despite the large drop in active rigs. This is partly due to greater rig efficiency in the U.S. from new technology.
“Even though the rig count is down by half, you can do more with the half that’s still working,” Rob Desai, an analyst at Edward Jones in St. Louis told Bloomberg.
OPEC members are struggling with one another for market share, pumping oil at record rates despite shrinking demand. Saudi Arabia has also been driving prices lower to attack the U.S. shale industry, which had spurred an American energy revolution until last year’s oil price drop. Globally, oil and gas companies have lost more than 250,000 jobs since prices plunged below $50 a barrel, reports World Oil.
OPEC will meet the first week of December to discuss future policy concerning current output levels, however many experts don’t expect any major shift in production. Venezuela’s Oil Minister Eulogio Del Pino warned that oil prices could fall into the mid-$20s if OPEC doesn’t act soon to change course, reports Bloomberg.
“We cannot allow that the market continue controlling the price,” said Del Pino at the Gas Exporting Countries Forum Summit in Tehran. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.”
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