Ahead of what could be an industry-changing presidential election in the US, a Rystad Energy analysis reveals that drilling and fracking activity has accelerated. North American fracking likely peaked in October at around 780 started jobs, with activity recovering from the trough touched in May and June. Meanwhile, our analysis of Baker Hughes data shows that the US horizontal oil rig count increased by 10 to 188, rising for a seventh straight week to reach its highest level since end-May.

The increase in drilling activity comes against the framework of the US presidential election, where onshore fracking has remained a central issue. While most operators – already dealing with an unprecedented dislocation in the oil market – are unlikely to immediately alter their operating schedule, the outcome of the elections may compel them to review their capital allocation plans in future, especially if the industry faces greater restrictions or regulation.

“Even if not implemented immediately, we believe a win by Vice President Joe Biden may eventually lead to a ban on fracking on federal land as his administration balances expectations of a section of his base who want more stringent action on climate change,” says Artem Abramov, Head of Shale Research at Rystad Energy.

A recent rally in the rig and frac spread count was triggered by the stabilization of oil prices in the third quarter, but many operators also fast-tracked permitting processes on federal acreage in the Delaware-New Mexico and DJ basins this year. The accelerated build-up of federal permits is noteworthy against that backdrop, as onshore operators may have to brace for new rules or hope for continuity in a business-as-usual policy environment. In addition to the US presidential election, the onshore industry’s risk-management analysis will also be a factor in long-term demand growth prospects for oil in the aftermath of the Covid-19 pandemic.

The total US horizontal rig count stood at 254, up by nine from a week earlier, with the Permian Basin adding nine rigs, while the Eagle Ford Basin in southern Texas added one, offset by a one-rig decline in the rest of the US. Even so, the total remains far below the low of 314 rigs touched during the previous oil market downturn in 2016.

The horizontal gas rig count fell by one, to 66, after holding steady for two weeks in a row as the count in major regions like Appalachia held flat. Gas-focused fracking in the regions of Appalachia and Haynesville is about 30-35% lower than a year earlier. Yet it has recovered, with our preliminary coverage for October suggesting that gas basins will likely see more than 100 jobs for a second consecutive month.

Permian drilling activity in the most developed oil-rich Northern Midland Basin rose by four rigs, to 48, in its steepest weekly increase since the week of 21 August, when it rose by five, to reach 40. In the Delaware Basin, the count held steady for the Texas portion, at 28, for a third week, while increasing by two to 44 for Delaware-New Mexico. The count in Midland South rose by three, to 18. It has gained by eight over a three-week period in the region.

Outside of the Permian Basin, the Eagle Ford rig count increased by one, to 18, holding in double digits for the sixth week in a row. The Bakken count also held flat at 11 for a third week to remain in double digits for a fifth consecutive week. The SCOOP & STACK count held steady at 11 for a second week. The count in the major gas regions all held flat – at 23 for the Marcellus region, six in Utica and 37 in Haynesville.

As the onshore industry grapples with low prices and an uncertain demand picture, the month of August will probably be the last when oil production in the US lower 48 states, excluding the Gulf of Mexico, posted a significant increase this year despite Hurricane Laura inducing 15,000-20,000 bpd outage of onshore production in Louisiana that month. Total lower 48 volumes are anticipated to hold flat during the last four months of the year, with monthly changes not exceeding 50,000 barrels per day, according to Rystad Energy estimates. After recovering by about 520,000 bpd in June and 370,000 bpd in July, output increased by approximately 55,000 bpd in August.

Lastly, when it comes to fracking, the uptick in activity will likely slow to a halt after October, as weekly counts have been slowing down in several major US basins over the last two weeks. The two-week average frac count in the Permian Basin fell below 60 jobs last week for the first time since week 36.

The Permian Basin likely closed at 320 started frac jobs in October. In turn, the other major oil regions of Eagle Ford, Bakken, Niobrara and Anadarko will almost surely post a sequential collective increase this month, as 155 jobs were identified as of 28 October, while the final figure for September ended up at 170 jobs. Gas-focused fracking in the Appalachia and Haynesville regions remains challenging, with only 55 started jobs identified by the same date.

The data through week 42 also suggests that the number of active frac spreads in the basin has slowed from the mid-60s to the mid-50s, and we anticipate a gradual declining trend to persist through the end of the year. While frac spreads were adjusted lower as early as week 41, we had not seen an immediate impact on the weekly job count before weeks 43-44. We argue that this was the result of a temporary spike in frac efficiency caused by a higher contribution of large-scale developments where many wells were started simultaneously.