U.S. drillers this week added oil rigs for a tenth week in the past 11, according to a closely followed report on Sept. 9. This was the longest streak of not cutting rigs since 2011 as the rig count recovered to February levels.
After falling by 206 rigs in the first half of the year, the rig count has increased or held steady every week so far this quarter. The rig count plunged from a high in October 2014 after crude prices collapsed in the steepest lowering of price in a generation.
Drillers added seven oil rigs in the week to Sept. 9, bringing the total rig count up to 414, the most since February, Baker Hughes Inc. said. That is well below the 652 oil rigs active during the same week one year ago, but is up from the recent bottom of 316 rigs seen in May.
All of the rigs added this week were those units located offshore Louisiana that returned to service after shutting during the week of Aug. 29 due to Tropical Storm Hermine, analysts said.
Drillers removed seven offshore rigs during the week ended Sept. 2 and added eight back during the week ended Sept. 9.
In all, the U.S. rig count increased by 11 to end the week at 508, compared with 848 a year ago. The Canadian rig count was down by three to end the week at 134, compared with 185 a year ago.
U.S. crude futures were on course to rise about 4% this week on hopes for a global deal on stabilizing crude output after Saudi Arabia, the leading oil producer inside OPEC, and Russia, the biggest producer outside the group, agreed on Sept. 5 to cooperate in oversupplied markets.
On Sept. 9, U.S. crude was trading at above $46 per barrel (bbl), close to the $50/bbl mark that analysts and drillers believe makes drilling more viable. Futures for calendar 2017 were trading over $50/bbl.
"We anticipate slow rig growth with all of the usual price caveats," said James Williams, president of energy consultant WTRG Economics in Arkansas. "If oil prices continue to rise, the rig count will continue to rise and U.S. production will stop declining and start to increase," Williams said, noting there is typically a two-month lag between prices increasing and rigs entering service.
More than two-thirds of rigs added over the past two months were located in the Permian Basin in West Texas and eastern New Mexico. Williams forecast that those new rigs would help boost Permian production by about 3 Mbbl/d in September and about 18 Mbbl/d in October, which should bring production in the basin to about 2 MMbbl/d.
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