Mubasher: The number of oil rigs is no longer considered an indicator of oil production changes for investors, a report by OilPrice.com argued on Tuesday.
Over the past few years, low prices pushed drillers to find alternative means to boost production rather than adding more rigs.
This could account for mixed oil output data during the recent period, as oil firms learned how to lift production from one single well by pumping more sand and chemicals into the laterals.
Analysts have been recently facing confusion over the accuracy of the weekly rig count report released by Baker Hughes as it does not necessarily reflect the shale production updates.
Instead, they pay further attention to “the length of the laterals, the frac sand quantities used per well, and the frac stages per well to gain the insight they need to predict future developments” according to the report.
“Horizontal wells are becoming too long and retrieving the oil and gas from them is becoming more difficult and less efficient,” Bloomberg reported in December, citing analyst David Wethe
However, analysts now need to watch closely all the available metrics and indicators instead of basing their views on Baker Hughes’ report and the Energy information Administration’s (EIA) data.
Edited by: Mahmoud El-Zahwey