Rig use in Gulf continues 3-week slide

vh80299.vh8.infi.net John Sullivan January 23, 2003   LAFAYETTE — Rig use in the Gulf of Mexico has declined for a third consecutive week while the possibility of a war in the Middle East is keeping oil above $32 a barrel on world markets.

“The market is very volatile now,” said Patrick Burke, an investment representative with the New Iberia office of Edward Jones. “War fear is the driving force behind high prices now, and the strike in Venezuela is also adding to that figure.”

Venezuela was the fifth-largest exporter of oil in the world, before the almost six-week strike that has paralyzed the nation. Before the strike, Venezuela was exporting about 2 million barrels of oil per day. Currently, Venezuela exports less than 200,000 barrels of oil per day.

The price of crude for March delivery closed Wednesday at $32.85, down 34 cents from the opening bell. On Tuesday, it closed at $34.61, the highest closing price since Nov. 30, 2000, when it closed at $33.82.

While the price of oil continued to swing back and forth, the number of mobile offshore drilling rigs in the Gulf of Mexico dropped by three rigs to 122, according to Tom Marsh, associate publisher of the ODS-PetroData weekly rig report.

“Rig utilization in the Gulf of Mexico is at 65.6 percent,” Marsh said Wednesday. “The world fleet held steady this week with 523 rigs under contract out of a total of 656 rigs.”

The high price of oil on the world market is having an effect on exploration and production in the Gulf of Mexico, Burke said. As long as oil prices remain high, companies will continue to cut their spending, and that means less drilling exploration, Burke said. That directly affects oil service support and drilling companies.

As the possibility of war between the United States and Iraq nears, Burke said he believes oil could jump above the $35-a-barrel mark and stay there for the short term.

A short war, Burke said, and prices should settle down to the normal range of $22 to $28 a barrel. A prolonged war could see oil stay at inflated prices, which could stop more oil drilling and exploration in the Gulf of Mexico.

“Venezuela and Iraq are the two wild cards now,” he said. “Everyone in the industry is watching to see what will happen next.”