U.S. oil producers added 21 oil rigs in the past week, the most in over a year, data showed on Friday, suggesting that drillers were moving more aggressively than expected, just before crude prices’ latest dive down. Oil producers, who cut rigs in the face of falling prices late last year, began to add rigs back in the week ending July 2, oil services company Baker Hughes Inc said in its closely followed report. The latest addition comes amid a 21 percent collapse in U.S. crude prices from a recent high in June, data showed on Friday.
The rise in the rig count this week was the biggest increase since April 2014. It was, however, only the third addition over the past 33 weeks, bringing the total rig count up to 659, the highest since late May.
Drillers added oil rigs in all four of the major U.S. shale oil basins with three in the Permian in West Texas and eastern New Mexico, two in the Eagle Ford in South Texas, and one each in the Niobrara in Colorado and Wyoming and the Bakken in North Dakota and Montana. The rig increase shows that energy firms have followed up on their plans to drill more when U.S. crude prices were averaging $60 a barrel in May and June.
U.S. crude oil futures this week, however, entered a bear market with prices down to about $48 a barrel from a recent high over $61 in late June. A 20 percent downturn is considered by many traders to constitute a bear market. In reaction to the Baker Hughes report, U.S. crude futures extended their losses, from down 0.8 percent to down 1.5 percent on the day, to a contract low of $47.72.
Analysts said both U.S. and Brent crude futures were trading at their lowest levels since March on lackluster global demand growth and lingering oversupply concerns as the Organization of the Petroleum Exporting Countries (OPEC), the United States and other producers continue pumping record or near record amounts of oil out of the ground. The current bear market was the biggest decline for U.S. crude futures since the front-month fell nearly 60 percent from over $107 in June 2014 to under $44 in January due to those same oversupply and uninspiring demand growth worries.
In response to that near 60 percent price collapse, U.S. drillers eliminated thousands of jobs and idled 60 percent of the record high 1,609 oil rigs that were active in October. Despite those cuts, U.S. crude production has averaged 9.6 million barrels per day for nine weeks in a row, its highest level since the early 1970s, according to government data.