Oil and gas drilling activity has dropped 43%
Bids for offshore drilling rights also plummet
By Tom Stundza -- Purchasing, 4/1/2009 2:07:00 PM
Oil drilling activity has dropped 43% in a year by the end of March, as year-over-year oil exploration in the U.S. is down 38% while natural gas exploration is down 44%. At the same time, high bids for offshore drilling rights in the central Gulf of Mexico fell by more than 80% compared with last year.
Analysts at BMO Capital Markets suggest the energy landscape has been altered during the global economic downturn so that reduced activity and interest in offshore drilling rights has fallen because the average price of crude oil spot prices is 49% lower than last year and natural gas spot prices are 56% lower.
Crude oil prices have fallen from $147/barrel in July to around $50 the past several weeks--with futures on the New York Mercantile Exchange stuck at that level after an early-March government report reported supplies of gasoline had soared unexpectedly. BMO Capital Markets says the energy futures market “will be paying close attention in coming days to gasoline demand and supply to look for any signs of recovery” in crude oil demand.
The Associated Press is reporting that energy companies bid $703 million on Wednesday for the right to explore for fossil fuels in the Gulf of Mexico, compared with last year's $3.67 billion in winning bids. Some companies are struggling to maintain spending on exploration and production.
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