Operators ride the crest of the global wave

These are plentiful times for the worldwide upstream industry. Last year, for the first time in more than two decades, the global drilling effort exceeded 100,000 wells. Although this year will be up only slightly, it will be another superlative, 100,000-plus performance in the total wells column. Furthermore, worldwide oil and condensate output squeezed out a minor gain, while global oil and gas reserves eased higher. For most of the summer of 2007, futures crude prices have traded relatively high, in a range of $65/bbl to $74/bbl, spurred by a consistently strong world economy, particularly outside the US. Oil prices remain overly sensitive to weather and military/security issues, demonstrating significant volatility on an increasingly daily basis. Healthy prices coupled with high production rates are yielding nice profits for most operators, who have plowed much of that money back into new drilling. Yet, there may be some storm clouds on the horizon.