HOUSTON — Goldman Sachs says lower oil prices will probably disappoint the U.S. petroleum industry’s hope of a drilling recovery in the second half of the year.
The U.S. oil price’s recent fall to around $52 a barrel will rule out the possibility that oil companies will send 100 to 150 drilling rigs to U.S. oil fields this year – a bullish market expectation born out of two months of stable $60 oil, which ended late last week. Goldman Sachs analysts wrote they project only 20 to 50 rigs will return to work by the end of the year.
That $8-a-barrel difference could have big implications for the oil field job market: Each rig employs scores of workers, directly and indirectly. The nation’s land rig count has fallen 61 percent from its peak last October, and predictably, the oil field service industry’s workforce has shrunk dramatically since the beginning of the year, with the four biggest firms cutting a combined 49,500 jobs in the first half of the year.
The decline comes just as oil companies were getting comfortable with $60 oil. They had added a dozen oil rigs to their active roster last week, according to Baker Hughes. That was evidence, Goldman said, that producers can increase drilling activity at $60 oil with oil field service costs coming down 30 percent.
Goldman believes the price of U.S. crude will sink to $45 a barrel by October — a bearish forecast compare to most, including the U.S. Energy Information Administration, which expects light, sweet crude to average $55 a barrel this year.
“Oil rebalancing remains in its early stages with the current cash flow and funding mix stalling it,” Goldman analysts wrote, referring to the global oil glut that has surpassed worldwide demand for oil. “We believe that as fundamentals reassert themselves and we move past the seasonal peak in demand, oil prices will continue to sequentially decline.”
Goldman said big buyers of crude around the world are probably done snapping up oil simply because it’s cheaper, and that combined with higher oil production out of the Organization of Petroleum Exporting Countries will weigh down prices.
U.S. crude edged down 5 cents in early trading Wednesday to $52.28 a barrel on the New York Mercantile Exchange. Brent, the international standard, rose 78 cents to $57.63 on the ICE Futures Europe.