U.S. drillers in the third quarter added the most oil rigs of any quarter since 2014, according to a closely followed report on Sept. 30, but the pace of additions has slowed as crude holds below $50 a barrel (bbl) despite OPEC's first plan in eight years to cut output.
Drillers added seven oil rigs in the week to Sept. 30, bringing the total rig count up to 425, the most since February but still below the 614 rigs seen one year ago, energy services firm Baker Hughes Inc. said.
For the quarter, they added 95 rigs, the most since drillers added 105 rigs in the first quarter of 2014. The oil rig count plunged from a record high of 1,609 in October 2014 to a low of 316 in May after crude prices collapsed in the steepest collapse in a generation due to a global oil glut. That decline continued through the first half of this year when drillers cut 206 rigs.
So far this quarter, however, drillers have added or at least not removed any oil rigs for 14 weeks in a row, the longest streak of not cutting rigs since 2011. That was also the third-longest streak of not cutting rigs since 1987, following a 19-week streak in 2011 and a 17-week streak ended in 2010.
U.S. crude futures were on track to their largest weekly advance in more than month on Sept. 30 at above $48/bbl after OPEC agreed to cut output, edging closer to the $50/bbl mark that drillers say make a return to the well pad viable.
In the short-term, analysts noted the rig count could decline if small, privately held operators pull back on drilling plans, choosing to conserve capital if prices remain low. Longer-term, however, analysts forecast the rig count would jump higher in 2017 and 2018 when prices were expected to rise as bigger publicly traded operators boost spending on drilling to increase production.
Futures for calendar year 2017 were trading above $51/bbl, while calendar year 2018 was above $53/bbl. Platts RigData, a forecasting unit of S&P Global Platts, projected total oil and natural gas land rigs would rise from an average of 449 in 2016 to 579 in 2017 and 676 in 2018 as energy prices increase. That compares with an average of 883 rigs in 2015.