U.S. energy firms added two oil rigs this week, the fifth increase in a row, signaling further pressure on a market awash with crude.
The rise came even as U.S. crude prices have fallen by more than a third from recent highs.
Reflecting plans announced in May and June, when U.S. crude futures averaged $60 a barrel, drillers added two oil rigs in the week ended Aug. 21, bringing the total count up to 674, the highest since early May, oil services company Baker Hughes Inc. said in its closely followed report.
"Everyone is still looking at it saying 'Wow, you still don't have production coming down,'" said Tariq Zahir, founder at Tyche Capital in Laurel Hollow, New York.
Rigs were added in formations including the Williston Basin, where three were brought online and the Granite Wash, where one was added. Two rigs were removed in the Permian Basin, which has seen a pick-up in recent weeks.
U.S. oil prices headed for their eighth consecutive week of declines on Aug. 21, the longest losing streak since 1986, after a sharp drop in China manufacturing increased worries over the health of the world's biggest energy consumer.
"The question is how long will it continue to rise," said Phil Flynn, an analyst with the Price Futures Group, referring to the rig count. "With oil prices dropping to around $40, at some point we will see a fallback in rig counts."
U.S. crude oil futures have fallen by as much as 20% in the past month to 6-1/2-year lows. Prices are down by as much as 34% from their six-month high of $61.43 in early June.
U.S. crude futures fell 60% from over $107 in June 2014 to near $42 in March due to those same oversupply worries and uninspiring demand growth.
In response to that 60% price collapse, U.S. drillers eliminated thousands of jobs and idled 60% of the record high 1,609 oil rigs that were active in October.
Recommended Reading
CEO: Coterra ‘Deeply Curious’ on M&A Amid E&P Consolidation Wave
2024-02-26 - Coterra Energy has yet to get in on the large-scale M&A wave sweeping across the Lower 48—but CEO Tom Jorden said Coterra is keeping an eye on acquisition opportunities.
CEO: Magnolia Hunting Giddings Bolt-ons that ‘Pack a Punch’ in ‘24
2024-02-16 - Magnolia Oil & Gas plans to boost production volumes in the single digits this year, with the majority of the growth coming from the Giddings Field.
E&P Earnings Season Proves Up Stronger Efficiencies, Profits
2024-04-04 - The 2024 outlook for E&Ps largely surprises to the upside with conservative budgets and steady volumes.
Kimmeridge Fast Forwards on SilverBow with Takeover Bid
2024-03-13 - Investment firm Kimmeridge Energy Management, which first asked for additional SilverBow Resources board seats, has followed up with a buyout offer. A deal would make a nearly 1 Bcfe/d Eagle Ford pureplay.
Laredo Oil Subsidiary, Erehwon Enter Into Drilling Agreement with Texakoma
2024-03-14 - The agreement with Lustre Oil and Erehwon Oil & Gas would allow Texakoma to participate in the development of 7,375 net acres of mineral rights in Valley County, Montana.