Holidays responsible for slow down in drilling
A recent decline in US land drilling permits is most likely the result of holiday-related lulls, rather than sharply lower oil prices, analysts said this week.Indeed many of the rigs are still working around the clock. I just returned from a trip where many are working in the Eagle Ford formation and they were working on Christmas day.
As NYMEX oil prices have fallen to the mid-$50s/barrel level and held there for the past week or so, the number of issued land drilling permits appears to be largely in line with historical averages.
A look at permitting activity stretching back to mid-June, when oil began its descent from about $107/b, shows that while permitting is down from six months ago, the drop has not been severe.
And even the sizable late-November decline in permitting was in line with the typical seasonal pattern given that permitting activity usually falls during the US Thanksgiving Day holiday, analysts said.
A few weeks ago "some people were saying [the low number of permits] was a sign of the rig downturn, but in fact what they did was seize on the traditional seasonal downturn and try to extrapolate from there an early warning sign of an industry collapse," Bob Williams, director of news and analysis for RigData, which collects rig and drilling data, said.