U.S. energy companies this week added oil rigs for a tenth week in a row, extending the drilling recovery into an eighth month as crude prices remained near an 18-month high.
Drillers added four oil rigs in the week to Jan. 6, bringing the total count up to 529, the most since December 2015, energy services firm Baker Hughes Inc. (NYSE: BHI) said on Jan. 6.
That was the first time the current rig count topped the year ago level since January 2015. A year ago, there were 516 active oil rigs. It was also drillers’ longest weekly streak of adding rigs since August 2011.
Since crude prices first topped $50 a barrel in May after recovering from 13-year lows in February, drillers have added a total of 213 oil rigs in 29 of the past 32 weeks, the biggest recovery in rigs since a global oil glut crushed the market over two years starting in mid-2014.
The Baker Hughes oil rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May as U.S. crude collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.
U.S. crude futures were holding around $54 a barrel on Jan. 6 as some producers in the Organization of the Petroleum Exporting Countries (OPEC) started to cut output in line with an agreement reached in November.
That puts the front-month on track for its seventh week of gains in the last eight, putting the contract up about 23% since mid-November.
Analysts said they expect U.S. energy firms to boost spending on drilling and pump more oil and natural gas from shale fields in coming years now that energy prices are projected to keep climbing.
Futures for the balance of 2017 were trading above $56 a barrel, while calendar 2018 was fetching over $57.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and natural gas rig count would average 763 in 2017 and 877 in 2018. Most wells produce both oil and gas.
That compares with 648 oil and gas rigs at the end of 2016. The average number of oil and gas rigs active each week in 2016 was 509 versus 978 in 2015, according to Baker Hughes data.
Analysts at U.S. financial services firm Cowen & Co. said in a note this week that its capex tracking showed 25 E&P companies planned to increase spending by an average of 33 percent in 2017 over 2016.
That spending increase in 2017 followed an estimated 47% decline in 2016 and a 35% decline in 2015, Cowen said according to the 65 E&P companies it tracks.