U.S. energy companies this week added oil rigs for a seventh week in a row, extending a seven-month drilling recovery as crude prices held near a 17-month high.
Drillers added 12 oil rigs in the week to Dec. 16, bringing the total count to 510, the highest since January, but still below 541 rigs a year ago, energy services firm Baker Hughes Inc said on Friday.
Since crude prices briefly recovered from 13-year lows to around $50 a barrel in May, drillers have added oil rigs in 26 of the past 29 weeks for a total of 194, the biggest recovery in rigs since a global oil glut crushed the market over two years.
Almost two-thirds of the rigs added since May, or 121, were in the Permian basin, the nation’s biggest shale oil formation located in west Texas and eastern New Mexico, bringing the total there up to 258, the most since April 2015.
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 prices collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.
U.S. crude futures were trading around $52 a barrel on Friday, close to the 17-month high the contract hit earlier in the week, on signs OPEC and other producers are adhering to a global deal to reduce output. [O/R]
That put the front-month on track to rise for a fourth week in the last five, with the contract gaining about 20 percent during that time since mid-November.
Analysts said U.S. energy firms will likely boost spending on drilling and pump more oil and natural gas from shale fields in coming years with energy prices expected to continue climbing.
Futures for both calendar 2017 and 2018 were trading around $55 a barrel.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, forecast the total oil and gas rig count would average 508 in 2016, 723 in 2017 and 933 in 2018. Most wells produce both oil and gas.
That compares with an average of 978 oil and gas rigs active in 2015 and an average of 503 so far in 2016, according to Baker Hughes data.
Analysts at U.S. financial services firm Cowen & Co said in a note this week that its capital expenditure tracking showed 22 exploration and production (E&P) companies planned to increase spending by an average of 35 percent in 2017 over 2016.
That spending increase in 2017 followed an estimated 48 percent decline in 2016 and a 35 percent decline in 2015, Cowen said, according to the 64 E&P companies it tracks.