Rig Count Continues to Drop
HOUSTON (AP) _ Oil drilling activity in the United States continues to sag, and the weekly rig count has hit another post-World War II low.
Dale Steffes, a Houston-based energy analyst, predicted that the number of oil rigs in operation will drop further in the weeks ahead because of the uncertainty of oil prices.
But eventually, the oil rig count will rise as prices steady at $14 to $15 a barrel, Steffes said.
The number of active rigs fell 37 to 686 in the week ended Monday, according to the Hughes Tool Co. rig count, the industry yardstick for drilling activity in the United States.
Since May, the rig count has dipped below the World War II low of 805 rigs in April 1943.
More than 1,000 rigs have been idled since December, a month after oil prices began plummeting from $32 a barrel and bottomed out at about $11. At the peak of the oil boom in December 1981, the Hughes count stood at 4,530.
Steffes said both large and small oil companies are holding back oil exploration because of the continued low prices of oil.
Oil prices have averaged $13 to $14 a barrel recently after hitting just over $17 a barrel last month, he said.
Foreign competition is part of the U.S. slowdown in oil drilling, he said.
Steffes said it is cheaper to drill oil in Saudi Arabia and Third World countries than in the United States, prompting U.S. companies to import rather than produce oil in the United States..
Costs range from $5 to $20 a barrel to produce oil in Texas - compared to $1 in Saudi Arabia, he said.
The future of U.S. oil production may rest on what is decided at the upcoming OPEC meeting, he said. Ministers from the 13 countries in the Organization of Petroleum Exporting Countries are to meet in Yugoslavia late this month.
An agreement among the OPEC members to hold back output to shore up prices would help U.S. drilling, he said.
And, he predicted the number of operating U.S. rigs will go up as the market steadies and oil company officials gain confidence that the oil price- slide has finally ended.
He said many oilmen are privately frightened now that oil prices will drop to $10 a barrel - although they say that the prices will rise in the fall.
Meanwhile, American consumers continue to conserve because they believe the prices head higher, Steffes said.
The current Hughes tallies showed that in Texas the number of rigs working is just over 30 percent of the year-ago level.
Offshore drilling also fell again after a one-week pause. The use rate in the Gulf of Mexico was down to 30.5 percent, while the worldwide figure dropped to 58.8 percent.