[adventured]

It's not a better metric. The only metric that matters, is output. The US is producing one million more barrels per day than a year ago. The only thing the reduction in rigs will cause, is slowing down growth.

The Saudis weren't the primary cause of the price drop anyway. The US dollar going on its greatest run in decades is what broke the price of oil. The strong dollar also caused the low price of oil in the late 1990s. The US dollar is the only thing that coincides with the drop in the price of oil. Global oil production had been in significant over-production for years prior to the price falling.

[breischl]

Drilling a well takes a long time, and it typically is not worth stopping part way. So it takes a long time for output to respond to price signals.

Most of the increased capacity is due to wells that were started before the prices dropped. You'll see the output dropping once those wells start tapering off, and no new ones are coming online to keep up the supply.

[hduwhbs]

New sites have high upfront capital costs, so even if they are losing money on each barrel they are losing less money than if they just stopped. Therefore no, output isn't the only thing that matters.

[JTon]

Then why are all the analysts fixated on supply-demand mechanics? Do you have further readings about the correlation between USD and the price of crude? I'm very interested.