US oil rigs plunge by 94 week on week as WTI rises $3.71/bbl

HOUSTON (ICIS)–The US rig count fell sharply by 94 week on week and by 199 year on year, reaching 1,223, Baker Hughes said on Friday.

This week’s decline was the biggest on records going back to 1987, Reuters reported.

Crude rallied sharply on the same day, with West Texas Intermediate (WTI) settling at $48.24/bbl, up $3.71, and Brent settling at $52.99/bbl, up $3.86.

Still, oil is far from its most recent peak in June, when Brent was $115/bbl.

The sudden drop in oil has been followed by sharp declines in several petrochemicals, many of which reached multi-year lows.

Dow Chemical and other companies noted that the declines have led to destocking, in which customers delay purchases on expectations of further price declines.

For Dow, this was limited to December, and orders reached normal levels in January.

For some companies, the decline in rig counts has hurt sales for chemicals and products used in oil production.

During a recent earnings conference call, Albemarle said the decline in crude prices will cause a steep decline in the sale of drilling completion fluids.

This decline could hurt sales in the company’s bromine business.

Earlier this month, Moody’s Investor Services warned that demand could slow down for proppants.

Proppants are sand particles that can be coated with epoxy or phenolic resins. They are used in hydraulic fracturing to prop up the fractures created by the drilling technique.

Projects whose viability depended on high oil prices could face delays or even cancellations. Already, Sasol is delaying a final decision on its gas-to-liquids (GTL) plant in Louisiana.

Long term, several CEOs expect the drop in oil prices to benefit their businesses, since it will act as an economic stimulus. If this scenario holds, then petrochemical demand would increase with the resulting rise in GDP.

The following lists the Baker Hughes rig data.