U.S. oil drillers this week added one rig each in the Permian and Bakken shale basins, data showed on Friday, another sign that higher crude prices are coaxing producers back to the well pad after a six-month slump in activity. Overall, drillers reduced the number of rigs by four this week, oil services company Baker Hughes Inc said in its closely followed report. It was the 28th straight weekly decline and brought the total rig count down to 631, the lowest since August 2010.
The number of oil rigs in the Permian, the nation’s biggest shale oil field located in West Texas and eastern New Mexico, climbed to 232 this week, up one from the lowest level in at least four years last week, according to Baker Hughes data going back to 2011. Drillers also added one rig in the Williston section of the Bakken formation centered in North Dakota. U.S. crude oil futures fell toward $59 a barrel on Friday in part on forecasts from shale producers that oil output would keep growing this year.
“As long as the drop in rigs fails to translate into a reduction in production, (it) will be unable to sustain price advances,” said Jim Ritterbusch of Ritterbusch and Associates, an energy consulting firm, in Illinois. He expects the rig count to increase by the end of the month. U.S. crude production has held around 9.6 million barrels a day for the last four weeks, its highest level since the early 1970s, according to government data.
U.S. drillers over the past six months have idled more than half their oil rigs since the number peaked at a record 1,609 in October. U.S. crude futures fell more than 60 percent from around $107 a barrel last June to a six-year low near $42 in March as producers in the United States, the Organization of the Petroleum Exporting Countries and elsewhere pulled near record amounts of oil out of the ground despite lackluster world demand.
OPEC kept producing oil to retain its market share by driving out more expensive producers like U.S. shale oil drillers and to keep prices low enough to encourage demand growth. And OPEC’s plan worked, sort of. U.S. energy firms did cut spending but are expected to ramp up drilling again now that U.S. crude futures have recovered to average around $60 a barrel since the start of May.