US weekly rig count little changed, Permian fracking legislation passed

Quantum Commodity Intelligence – North American drilling activity was marginally lower in the first report of 2024 from oilfield services firm Baker Hughes, continuing the negative trend after the 2023 rig count dropped by 20% year-on-year.

The total rig count dipped by one unit to 621 the week ending 5 January, some 151 rigs below the same stage last year, or a 19.5% drop.

Rigs drilling for oil nudged up by one to 501 units last week, or 117 fewer than at the same stage last year. Rigs drilling exclusively for gas was down two units at 118, but 36 down on the year.

Texas, the largest producing state, dipped one rig to stand at 308, although the majority of states were again unchanged on the week. The Permian Basin, spanning West Texas and New Mexico, added two rigs to stand at 311, down 42 on the year.

On US oil prices, NYMEX WTI trading on the Chicago Mercantile Exchange settled on Friday at $73.81/b for the Feb23 contract, up 3% on the week.

Front-month Mar23 ICE Brent futures closed at $78.76/b, up 2.25% over the same timeframe.

US natural gas prices for the Feb24 Henry Hub contract on NYMEX rallied 12% on the week to close at $2.86/mmBtu, with wintery conditions set to blanket the lower 48 states later this week, including the southern part of the country.

Earthquakes

Meanwhile, Bloomberg reported that the frequency of earthquakes in West Texas declined in 2023 for the first time in at least five years, ahead of a clampdown on burying toxic wastewater from oil drilling, a side effect of fracking.

The region was gaining a reputation as the earthquake capital of the US, but the Texas section of the Permian Basin recorded 194 quakes last year, a 10% drop from a record high in 2022, Bloomberg reported.

The earthquakes have been linked to a byproduct of fracking, whereby frackers inject high volumes of associated saline water back into the ground.

But the Bloomberg report noted that the Railroad Commission of Texas, which oversees drilling, has introduced new legislation to stop the water reinjection in two of the Permian's most active drilling areas, citing northern Culberson and Reeves counties.

The ban comes into effect on 12 January, applying to 23 deep disposal wells operated by frackers, including Chevron, BP and Coterra Energy. It comes after a spate of seismic activity in the fourth quarter, including seven tremors with a magnitude of 3.6 or more.