Figure 1. Tight oil horizontal rig counts. Source: Baker Hughes & Labyrinth Consulting Services, Inc.
Production has fallen and will fall more but rig count is the wrong measure at this time. The real measure is capital given to U.S. tight oil companies. And there seems to be plenty of really stupid capital
that thinks that investing now means buying low. Good luck with that onceoil prices fall
Figure 2. Bakken, Eagle Ford and Permian “Shale” tight oil production. Source: Drilling Info & Labyrinth Consulting Services, Inc.
There have been a steady stream ofarticleschampioning the ingenuity of U.S. tight oil producers for figuring out how to maintain production with fewer rigs. It doesn’t strike me as ingenious to produce more oil at low prices that ensure losing money.
OPEC will meet on Friday (June 5, 2015) and most doubt that a production cut will result. If that is the outcome, expect the recent rally in oil prices to end badly. If producers cared about their investors and share holders, they would be slashing production by shutting in wells. That might help oil prices rebound sooner and then, they could sell the oil at a profit instead of losing money while celebrating their own ingenuity.