U.S. energy firms added oil and natural gas rigs for a third week in a row for the first time since May even though oil prices eased for a second week after recently hitting a six-year high.
The oil and gas rig count, an early indicator of future output, rose five to 484 in the week to July 16, its highest since April 2020, Baker Hughes Co. said in its weekly report.
The total rig count was up 231 rigs, or 91%, over this time last year. It was also up 98% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940.
U.S. oil rigs rose two to 380 this week, their highest since April 2020. Gas rigs gained three to 104, their highest since March 2020, rising for five weeks in a row, the longest streak since March 2018.
U.S. crude futures were trading around $72 per barrel this week, near their lowest in almost a month. Last week, the contract rose to $76.98, its highest since November 2014.
However, oil prices were still up about 46% so far this year, and some energy firms plan to increase spending in 2021 after cutting drilling and completion expenditures over the past two years, although most were focusing on capital discipline and investor returns, rather than expanding supply.
In fact, many analysts do not expect that extra spending to boost output at all. Instead, they think it will only replace natural declines in well production.
Crude output from seven major shale formations is expected to rise by 42,000 bbl/d in August, to 7.907 MMbbl/d, compared with a 28,000 bbl/d rise in July, according to the U.S. Energy Information Administration’s monthly drilling productivity report.
Overall, U.S. oil production is expected to ease from 11.3 MMbbl/d in 2020 to 11.1 MMbbl/d in 2021 before rising to 11.9 MMbbl/d in 2022, according to government projections. That compares with the all-time annual high of 12.3 MMbbl/d in 2019.
After falling to a record low annual average of 433 rigs in 2020, according to Baker Hughes data going back to 1988, energy specialists at Simmons Energy forecast the count would rise to an average of 466 in 2021 and 583 in 2022.
That was higher than Simmons prior average rig count forecasts of 451 in 2021 and 558 in 2022.
The annual average rig count peaked at 1,919 in 2012, according to Baker Hughes.
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