U.S. energy firms added oil rigs for an 18th week in a row, the second-longest streak of weekly additions on record, as expectations of higher crude prices motivate drillers to boost monthly shale production to its highest level since mid-2015.
Drillers added eight oil rigs in the week to May 19, bringing the total count to 720, the most since April 2015, energy services firm Baker Hughes Inc. (NYSE: BHI) said on May 19.
The 18-week streak of rig increases was the second-longest run of additions since drillers added rigs for 19 weeks in a row through August 2011, according to Baker Hughes data going back to 1987.
U.S. crude futures rebounded this week to trade around $50 on May 19, putting the front-month contract on track for a second-straight week of gains, on expectations OPEC and other nations will extend production cuts beyond the end of June.
OPEC and other producers will meet on May 25 to decide whether to extend the cuts. Saudi Arabia, which is OPEC’s de-facto leader, Russia and other countries have already agreed on the need for an extension of the cuts through the end of 2017 or possibly beyond.
U.S. shale production is expected to rise for the sixth consecutive month in June to 5.4 million barrels per day, its highest since May 2015, government data showed on May 15, as producers boost drilling activity.
Futures for the balance of 201 and calendar 2018 were both fetching about $51 a barrel.
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 862 in 2017, 1,067 in 2018 and 1,184 in 2019. Most wells produce both oil and gas. That compares with an average of 786 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.
Analysts at U.S. financial services firm Cowen & Co. said in a note this week that its capex tracking showed 60 E&P companies planned to increase spending by an average of 51% in 2017 versus 2016.
That expected spending increase in 2017 followed an estimated 48% decline in 2016 and a 34% decline in 2015, Cowen said, according to the 64 E&P companies it tracks.