U.S. energy firms added oil rigs for a 24th week in the past 25 as the yearlong drilling recovery continues, but the pace of additions has slowed in recent months as crude prices declined despite OPEC-led efforts to end a global supply glut.
Drillers added seven oil rigs in the week to July 7, bringing the total count up to 763, the most since April 2015, Baker Hughes (NYSE: BHI) energy services company said in its closely followed report on July 7. That compares with 351 active oil rigs during the same week a year ago. Drillers have added rigs in 54 of the past 58 weeks since the start of June 2016.
The pace of those additions, however, has slowed over the past few months with the decline in crude prices with the total added over the past four weeks holding at six the lowest since January.
U.S. crude futures were trading around $44 per barrel on July 7, putting the contract on track to fall for a sixth week in the past seven, on data showing U.S. output continues to rise, frustrating efforts by OPEC and other producers to curb global oversupply.
After agreeing in December to cut production by around 1.8 million barrels per day (MMbbl/d) for six months from January 2017 to June 2017, OPEC and other producers in late May agreed to extend those cuts for another nine months through the end of March 2018.
U.S. oil production rose 1% to 9.3 MMbbl/d last week, correcting a drop in the previous week that was due to one-off maintenance work and hurricane shutdowns.
Analysts said U.S. shale companies would continue to drill for more oil so long as crude prices are expected to rise in future months.
Futures for the balance of 2017 were trading at about $44.50 a barrel, while calendar 2018 was fetching over $46 a barrel.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, forecast the total oil and gas rig count would average 887 in 2017, 1,108 in 2018 and 1,219 in 2019. Most wells produce both oil and gas. That compares with an average of 824 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.