U.S. energy companies added one oil rig this week, the fourth consecutive week of increases, despite a 9% decline in crude prices over the past four weeks.
Despite that decline, producers still expect higher prices for their oil in 2018 than they received in 2017.
The oil rig count in the week to June 15 rose to 863, the highest level since March 2015, Baker Hughes, a GE company, said in its weekly report. That was the 10th time drillers added rigs in the past 11 weeks, although the increases have slowed down in June to about one a week.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 747 rigs were active as energy companies have been ramping up production in tandem with OPEC's efforts to cut global output in a bid to take advantage of rising prices.
U.S. crude futures were on track to fall for a fourth week in a row this week, falling below $65 per barrel on June 15 ahead of an OPEC meeting next week where Saudi Arabia and Russia were expected to say they will boost output.
So far this year, U.S. oil futures have averaged $65.15 per barrel. That compares with averages of $50.85 in 2017 and $43.47 in 2016.
Looking ahead, crude futures were trading at about $64 for the balance of 2018 and below $62 for calendar 2019.
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co. this week said the E&P companies they track have provided guidance indicating a 13% increase this year in planned capital spending.
Cowen said those E&Ps expect to spend a total of $81.2 billion in 2018, up from an estimated $72.1 billion in 2017.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast average total oil and natural gas rig count would rise to 1,038 in 2018, 1,097 in 2019 and 1,232 in 2020, up from a projected 1,025 in 2018 and 1,125 in 2019.
With the boost in rigs so far this year, however, analysts were not so bullish on much further increases in the count.
Since 1,059 oil and gas rigs were currently in service, drillers would only have to add a few more rigs for the rest of the year to hit Simmons’ forecast for 2018.
So far this year, the total number of oil and gas rigs active in the United States has averaged 999, up sharply from 2017’s average of 876. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
The U.S. Energy Information Administration (EIA) projected average annual U.S. production will rise to a record high 10.8 million barrels per day (MMbbl/d) in 2018 and 11.8 MMbbl/d in 2019 from 9.4 MMbbl/d in 2017.
The current all-time U.S. annual output peak was in 1970 at 9.6 MMbbl/d, according to federal energy data.