U.S. energy firms added oil rigs for a record 19 weeks in a row as expectations of higher crude prices after an OPEC-led decision to extend current output curbs motivated producers to boost spending on new drilling.
The pace of those additions, however, has slowed with the total added so far in May falling to the lowest since October due to soft oil prices.
Drillers added two oil rigs in the week to May 26, bringing the total count up to 722, the most since April 2015, energy services firm Baker Hughes Inc. said on May 26. That is more than double the same week a year ago when there were only 316 active oil rigs, the least in more than six years.
The 19 weeks of rig increases matches the longest streak of consecutive additions on record, which ended in August 2011, according to Baker Hughes data going back to 1987.
U.S. crude futures were trading below $50 a barrel on May 26, after plunging nearly 5% on May 26 following an OPEC-led decision to extend current production curbs that investors gauged did not go far enough to reduce a global supply glut.
After agreeing in December to cut production by around 1.8 million barrels per day for the first six months of the year, OPEC and other producers agreed to extend those curbs for another nine months through the end of March 2018.
Some analysts expect the extended cuts will likely lead to the acceleration of output from U.S. shale oil basins, where producers can operate at much lower costs.
“As a consequence of the extension of the cuts, we are likely to see a more supportive oil price and yet more U.S. shale oil rigs being added to the market over the coming nine months,” said Bjarne Schieldrop, chief commodities analyst at Nordic corporate bank SEB. “In our view, this is likely to flip the global supply/demand balance for 2018 and 2019 into surplus.”
Futures for the balance of 2017 and calendar 2018 were both fetching around $50 a barrel.
Analysts at U.S. financial services firm Cowen & Co. said in a note this week that its capex tracking showed 60 E&P companies planned to increase spending by an average of 51% in 2017 over 2016. That expected spending increase in 2017 followed an estimated 48% decline in 2016 and a 34% decline in 2015, Cowen said according to the 64 E&P companies it tracks.
Recommended Reading
Aethon Cuts Rigs but Wants More Western Haynesville Acreage
2024-03-28 - Private gas E&P Aethon Energy has drilled some screamers in its far western Haynesville Shale play—and the company wants to do more in the area.
Energy Transition in Motion (Week of March 28, 2024)
2024-03-28 - Here is a look at some of this week’s renewable energy news, including proposals submitted to develop about 6.8 gigawatts of wind projects offshore Connecticut, Massachusetts and Rhode Island.
SLB to Acquire Majority Stake in Aker Carbon Capture
2024-03-28 - SLB and Aker Carbon Capture plan to combine their technology portfolios, expertise and operations platforms to bring carbon capture technologies to market faster and more economically, SLB said in a news release.
CERAWeek: Tecpetrol CEO Touts Argentina Conventional, Unconventional Potential
2024-03-28 - Tecpetrol CEO Ricardo Markous touted Argentina’s conventional and unconventional potential saying the country’s oil production would nearly double by 2030 while LNG exports would likely evolve over three phases.
DUG GAS+: Chesapeake in Drill-but-don’t-turn-on Mode
2024-03-28 - COO Josh Viets said Chesapeake is cutting costs and ready to take advantage once gas prices rebound.