US oil industry set to slow – ING

The weakness in oil prices will prompt a pullback in drilling activity in the US, ING's commodity expert Warren Patterson notes.

Producer hedging may protect some oil producers initially

"According to the Dallas Federal Reserve Energy Survey, oil producers need, on average, US$65/bbl to profitably drill a new well. With West Texas Intermediate (WTI) trading closer to the mid-US$50s, there’s little incentive to drill. Producer hedging may protect some oil producers initially. But US crude oil supply growth in 2025 and 2026 is looking less likely."

"The US oil rig count stands at 479, down from a peak of 489 at the start of April. Well completions also appear to be trending lower, reflected in a lower frac spread count. In addition, if drilling activity does hold up, it isn’t guaranteed to translate to production. Producers may delay completing these wells in the current low-price environment. This would cause an increase in the inventory for drilled, but uncompleted wells (DUCs)."

"A slowdown in the US oil industry also has ramifications for US natural gas supply, given that a large amount of this supply is associated with production. This could be an issue, particularly given the stronger gas demand we’ll see with a ramp-up in US LNG export capacity."