The rise in oil prices is feeding through into higher spending in the oil and gas sector and will continue to drive up drilling activity globally over the second half of the year and 2019, according to oil and gas analysts at Fitch Solutions Macro Research.
“Globally, rotary rig counts have averaged 183 rigs higher in the year to date, compared to the same period last year,” the analysts said in a report sent to Rigzone on Tuesday.
“The majority of additions have been made in North America, as shale developments continue to pick up pace. Internationally, the rig count has averaged 23 rigs higher, but performance has been widely varied between the different regions,” the analysts added.
Fitch Macro Solutions Research analysts said they expect “continued strong growth in US shale, with producers set to add around 1.25 million barrels per day of crude and condensates over 2018 on an annual average basis”.
In the report, the Fitch Macro Solutions Research representatives also stated that “there is a shift underway away from gas and towards oil-directed drilling”.
“When oil prices decline, both oil-and gas-directed rig counts tend [to] fall, due to the outsize impact of oil revenue on capex [capital expenditure]. However, due to a number of factors, including differences in cost and contracting structures, gas-directed drilling tends to face less downside pressure overall,” the analysts said.
“As oil prices continue to recover, and investor confidence with them, we expect the focus to swing back towards oil over the coming years. However, we view the shift as a cyclical and not a structural one, with secular trends in policy, pricing and technology strongly favoring gas over a longer-term (multi-decade) horizon,” the analysts added.