U.S. energy companies added 26 oil rigs this week, boosting the count to 791, its highest since April 2015, even as crude pulled back from three-year highs with drillers expecting higher prices for their output in 2018 than last year.
The increase in the week to Feb. 9 was the biggest weekly rise since January 2017, Baker Hughes, a GE company, said in its weekly report.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 591 rigs were active as energy companies have continued to boost spending since mid-2016 when crude prices began recovering from a two-year crash.
U.S. crude prices on Feb. 9 fell through $60 per barrel for the first time since December and have tumbled more than 11% from this year’s high point in late January, due to growing worries that U.S. production will overwhelm efforts by OPEC nations to cut supply. That compares with averages of $50.85 in 2017 and $43.47 in 2016.
Looking ahead, futures were trading above $57 for the balance of 2018 and below $54 for calendar 2019.
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co. said 36 of the roughly 65 E&Ps they track, including Pioneer Natural Resources Corp., have already provided capex guidance indicating an 8% increase in planned spending over 2017.
Pioneer said it expects to spend about $2.65 billion in drilling and completions in 2018. Cowen said that was up 1% from 2017.
Cowen said the E&Ps it tracks planned to spend about $66.1 billion on drilling and completions in the lower 48 U.S. states in 2017, about 53% over what they planned to spend in 2016.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week slightly reduced their forecast the total oil and natural gas rig count to an average of 1,002 in 2018 and 1,128 in 2019. Last week, they forecast 1,006 in 2018 and 1,131 in 2019.
There were 975 oil and natural gas rigs active on Feb. 9, also the highest since April 2015. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
The U.S. Energy Information Administration in February projected U.S. production would rise to a record high annual average of 10.6 million barrels per day (MMbbl/d) in 2018 and 11.2 MMbbl/d in 2019, up from 9.3 MMbbl/d in 2017.
The current all-time U.S. output annual peak was in 1970 at 9.6 MMbbl/d, according to federal energy data.