North America: Drilling activity will soar ///

United States. Last January, we cited the difficulties inherent to forecasting drilling activity, since there were several discontinuities among the leading indicators. The most glaring was the falling active rig count around the world, even as oil and gas prices were on the rise. The chaos in Venezuela and the run-up to the war in Iraq were thought by some to be the primary reason for rising oil prices. But with both situations in the past, operators are more comfortable in attributing higher oil prices to the overall tight supply/ demand situation. Now with six more months of data, those earlier discontinuities appear to be fading, and thus suggest a strong second half. If Canadian rigs, which drop dramatically every spring, are excluded, the number of rigs running in the rest of the world was nearly 16% higher in June than at the beginning of 2003. Active rigs in the US were up almost 25% during the same period. The second half should be even better.

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