There are many contributing factors that are causing US oil prices to remain suppressed. Part of the reason is that petroleum inventories are not declining as quickly as some market participants had expected. Also, there are concerns that persistent production growth in the US will delay the market’s ability to balance. Additionally, production has rebounded in Libya and Nigeria, which has offset some of the efficacy of the OPEC-led production cut. As a result, WTI oil prices have been hovering around $47/b the past three months, reaching as low as $42.53/b on June 21, and we are starting to see some hesitation on the part of the US producer. Through the first five months of 2017 the US rig count grew by 45% (or 300 rigs), which equates to adding 60 rigs per month. Over the last month, however, the pace of growth has slowed dramatically — increasing only 4% (or 36 rigs), bringing the US total to 1,050 rigs for early July. If prices remain below $45/b, producers will most likely decrease drilling efforts because of internal rates of return below 20% (blue bars below) for all plays except the Permian, according to the Platts Well Economic Analyzer. If
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Source: CTRM Center