In a recent report from Credit Suisse, analyst James Wicklund projects that despite falling rig counts, U.S. oil production won’t be bottoming-out anytime soon. This outlook likely means an extended delay in the long-term price recovery of the U.S. oil field service (OFS) sector.

Short-Term Opportunities

According to Credit Suisse, as the rapid decline in U.S. rig counts subsides, market optimism could result in a short-term boost for OFS stocks and create opportunities for near-term investors.

However, despite the current 55 percent decline in rig counts, there is still an estimated 5,000-surplus of drilled-but-uncompleted (DUC) oil inventory. According to the report, this surplus, coupled with rig count growth forecasts of up to 450 additional rigs added by the end of next year, makes continued overproduction likely and will delay a true turning point in the market.

Long-Term Challenges

Preannounced Q2 earnings from five companies, including Newpark Resources Inc NR 2.2% and Oil States International Inc OIS 3.96%, reflect…

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