US drilling rig count witnessing sharp decline

The war between United States and OPEC (led by Saudi Arabia) regarding who enjoys the power to determine crude oil price seems to be getting bitter.  Initially it appeared that neither of the groups would voluntarily cut down production but now it appears both are cutting production but at a different pace.

As the price declined by almost 50% it started pinching all but shale producers felt the real brunt. According to one of Bloomberg reports drillers have reduced the number of rigs in service by 83 to 1,140, the lowest number since December 2011.

“We’re seeing signs that the market is beginning to give greater weight in its pricing to the likelihood that shale oil production in the U.S. will be cut over coming months,” Ric Spooner, Chief Strategist at CMC Markets in Sydney, told newswire service.

According to Baker Hughes total U.S. rig count has declined by a record 435 in nine weeks. The drop of 37 at the Permian Basin, the largest oil field of the US has been the steepest since the services company began reporting basin-by-basin counts in February 2011.

OPEC alone can’t maintain “reasonable prices” and cooperation with producers outside of the group is necessary, Venezuela’s Chavez said. A news indicates that Chevron has cut output from Saudi-Kuwaiti oil fields.

According to some scanty details crude production dropped by 20 percent since October at a venture that Chevron Corp operates in the Wafra field, which Kuwait is developing in collaboration with Saudi Arabia.

The Wafra project, in which Chevron had planned to invest as much as US$40 billion, is one of the world’s largest attempts to free heavy oil by injecting steam underground.

All eyes are set at the next meeting of OPEC when Saudi Arabia, the largest producer and Kuwait, the group’s third-biggest member will join other OPEC states to assess market conditions and set production levels scheduled on June 5 in Vienna.

Reportedly, Kuwait has stopped issuing work permits for Saudi Chevron employees at Wafra oil fields, located in a shared neutral zone along Saudi Arabia because country’s ministry of labor and social affairs halted services to the company.