The number of US oil drilling rigs in operation fell by 10 to 362 last week, preserving a downtrend of declines. Investors regard the rig count data, published weekly by oil services company, Baker Hughes, as a proxy for overall US oil production activity.

According to Baker Hughes, there are 72% fewer operational rigs in the US since the peak registered in October 2014 when there were 1,609.

US shale oil producers have been subjected to pricing pressure thanks to a global glut in supply exacerbated by a flat refusal by OPEC countries to reduce output. Saudi Arabia and Russia are leading an initiative that, if successful, will freeze oil production at January levels and this led to a rally in oil prices.

“That rally seems to have petered out,” said a senior commodities researcher at Mizuho Financial Global. “Prices poked their head above $40 but the cold hard reality of inventory builds coupled with the fact that OPEC’s 4th largest producer, Iran, will not participate in any output freeze has pushed prices back well below $40.”

US shale oil producers have increased efficiency to the point where, even with far fewer rigs, overall production has only fallen by half a million barrels a day.

Mizuho Financial Global says it does not believe an accord on a production freeze will be reached.
Even If it is reached, there is no way to guarantee that each signatory to the deal will actually freeze their production,” said the commodities researcher.

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