U.S. energy companies added the most oil drilling rigs in a week since June as crude prices traded up to their highest levels since the summer of 2015.
Drillers added nine oil rigs in the week to Nov. 10, bringing the total count up to 738, said Baker Hughes Inc. (NYSE: BHGE), General Electric Co.'s (NYSE: GE) energy services firm, in its closely followed report on Nov. 10.
The rig count, an early indicator of future output, is still much higher than a year ago when only 452 rigs were active after energy companies boosted spending plans for 2017 in the second half of last year as crude started recovering from a two-year price crash.
The increase in drilling lasted 14 months before stalling in August, September and October after some producers started trimming their 2017 spending plans when prices turned softer over the summer.
The U.S. Energy Information Administration (EIA) this week slightly lowered its oil production growth forecast for 2017 to a rise of 370,000 barrels per day (bbl/d) from last month's expectations of a 380,000 bbl/d increase.
U.S. production, however, was expected to rise to 9.2 million bbl/d in 2017 and a record 10 million bbl/d in 2018 from 8.9 million bbl/d in 2016, the EIA said. Output peaked at 9.6 million bbl/d in 1970.
The largest U.S. independent oil and natural gas producer ConocoPhillips Co. (NYSE: COP) said this week it plans to spend an average of $5.5 billion annually for the next three years as long as oil prices stay above $50 per barrel.
U.S. West Texas Intermediate crude futures traded close to $58 a barrel this week, their highest since July 2015. So far in 2017, crude futures have averaged almost $50 a barrel, easily topping last year's $43.47 average.
Looking ahead, futures were trading near $57 for the balance of the year and calendar 2018.
ConocoPhillips' spending forecast, an increase from 2017 and higher than many Wall Street analysts expected, comes as it, like some peers, focuses more on generating profits rather than boosting production at any cost.
Overall, E&Ps expect to increase spending on U.S. drilling and completions in 2017 by about 53% over what they spent in 2016, according to U.S. financial services firm Cowen & Co. That expected 2017 spending increase followed an estimated 48% year-over-year decline in 2016 and a 34% decline in 2015, the firm said.
Cowen said nine of the 64 E&Ps they track have already provided capex guidance for 2018 indicating a 16% increase in planned spending over 2017.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week revised downward their forecast for the total oil and natural gas rig count to an average of 872 in 2017, 910 in 2018 and 1,059 in 2019. Two weeks ago, it forecast 874 in 2017, 923 in 2018 and 1,072 in 2019.
That compares with an average of 868 oil and gas rigs so far in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
With 907 total oil and gas rigs in operation now, that means Simmons analysts expect the number of rigs to decline through the balance of this year before rising next year.