U.S. energy firms added oil rigs for a record 20th week in a row in a yearlong return to the well pad although some analysts expect the pace of additions could level off as crude prices remain below $50 per barrel.
Drillers added 11 oil rigs in the week to June 2, bringing the total count up to 733, the most since April 2015, energy services firm Baker Hughes Inc. (NYSE: BHI) said. That is more than double the same week a year ago when there were only 325 active oil rigs.
Monthly additions in May were at the lowest levels since October due to soft oil prices. The recovery in oil prices has stalled since February, and prices are now no higher than they were a year ago.
Experience indicates the rig count will stop rising within a few months, said John Kemp, a Reuters market analyst.
“The active rig count is likely to peak in June or July unless the price of benchmark West Texas Intermediate (WTI) crude starts rising again above $50 per barrel,” he added.
U.S. crude futures were trading under $48 a barrel, putting the front-month on track for a second weekly decline in a row, on worries that U.S. President Donald Trump’s decision to abandon a climate pact could spark more crude drilling in the U.S., worsening a global glut.
U.S. production was projected to increase output to 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 data.
Futures for the balance of 2017 were trading around $48 a barrel, while calendar 2018 was fetching nearly $49 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 874 in 2017, 1,086 in 2018 and 1,197 in 2019. Most wells produce both oil and gas. That compares with an average of 798 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.