American oil and gas drillers could get some much-needed wind in their sails if the costs of drilling decline as expected in the coming months. Bloomberg’s Kevin Crowley reports:
While inflation is persisting across the US — albeit at a slower pace — the country’s oil fields are a rare corner of the economy where prices are actually dropping.
Drill pipe prices have halved this year, daily rig rates are down by more than 10% and the costs of steel and diesel are also trending lower. The number of active oil rigs has dropped 13% from this year’s peak, indicating there’s a surplus of equipment in the market. The only major holdout is labor, with hourly wages still on the rise.
Overall, US oil production costs declined by 1% in the second quarter, marking the first drop in three years, according to Goldman Sachs Group Inc.
The pullback may seem modest — especially compared with a 50% increase in Permian Basin well costs from 2021 to 2023 — but it’s poised to gain momentum in the coming months, analysts say. All told, costs will be about 10% lower next year than this year, according to Citigroup Inc.
For US oil companies, it’s welcome relief.
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