US OIL FIRMS FACING CHALLENGING QUARTER DESPITE RISING CRUDE
- 4 weeks ago
US oil services sector is set to see a struggling recovery in 2018's third quarter, despite bolstered crude barrel prices.
Despite crude oil resting near four-year highs, oilfield services firms are slated to see a staggering recovery with third-quarter profits expected in the next few days as external pressures prevent US oil companies from fully capitalizing on high oil margins.
Oil producers are holding off of finishing new well drilling projects, and a tightening labour market coupled with US tariffs on steel and aluminum are driving up services' costs across the board. West Texas drillers that drove the shale revolution within the US have completely overwhelmed the geographical US oil sector, causing costs to skyrocket while regional oil prices collapse amidst a slowing pace of production growth both for the region and the broader sector.
Wall Street markets have begun trimming their bets on earnings forecasts for oilfield companies, despite crude oil prices being up over 40% from a year ago. Stalled well drilling is especially worrisome for oil markets, with land-drilling previously being seen as the saving grace of US oil markets that have been waiting for offshore drilling projects to begin ramping up again.
Completing a well by fracking and tying it to pipelines represents about 60 percent of onshore well expenditures. With producers holding off completions until new pipelines start up next year, there is less demand for services.
Source : Reuters