U.S. energy firms added oil rigs for a 17th week in a row, extending a 12-month drilling recovery that is expected to help boost crude production in the U.S. to a record high next year.
Drillers added nine oil rigs in the week to May 12, bringing the total count up to 712, the most April 2015, energy services firm Baker Hughes Inc. (NYSE: BHI) said on May 12. While that is more than double the same week a year ago when there were only 318 active oil rigs, the pace of those additions has declined with the total over the past four weeks falling to the lowest since March.
U.S. crude output was expected to rise to an average of 9.3 million barrels per day (MMbbl/d) in 2017 and a record high 10.0 MMbbl/d in 2018 from 8.9 MMbbl/d in 2016, according to federal energy data.
Higher output in non-OPEC countries, particularly the U.S., Canada and Brazil, which has offset the OPEC deal reached last year to cut production, should limit any upside to global oil prices through the end of 2018, the U.S. government said.
U.S. crude futures, however, rebounded this week to trade around $48 on May 12, putting the front-month contract on track to increase for the first time in four weeks, on expectations that OPEC will extend production cuts beyond the end of June and on falling U.S. inventories.
OPEC and other producers meet on May 25 to decide whether to extend cuts. Saudi Arabia, OPEC's de-facto leader, has said it expects an extension to the end of 2017 or possibly beyond.
U.S. crude stockpiles, meanwhile, posted their biggest one-week drawdown since December last week as imports dropped sharply.
OPEC on May 11 sharply raised its forecast for oil supply from non-member countries in 2017 as higher prices encourage U.S. shale drillers to pump more, hampering the producer group’s efforts to clear a glut and support prices by cutting output.
The Railroad Commission of Texas issued 909 drilling permits in April 2017, a 33 percent increase from the same month a year ago, the state's energy regulator said on May 9, more evidence of a U.S. energy resurgence from improved oil prices.
Futures were fetching around $48 a barrel for the balance of 2017 and about $49 for calendar 2018.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and gas rig count would average 858 in 2017, 1,061 in 2018 and 1,178 in 2019. Most wells produce both oil and gas. That compares with an average of 780 so far in 2017, 509 in 2016 and 978 in 2015. If correct, Simmons’ 2019 forecast would be the most since 2014 when there were 1,862 active rigs. The rig count peaked in 2012 at 1,919, according to Baker Hughes data going back to 1988.