28 May 2017, Houston — U.S. energy firms added oil rigs for a record 19 weeks in a row as expectations of higher crude prices after an OPEC-led decision to extend current output curbs motivate producers to boost spending on new drilling.
The pace of those additions, however, has slowed with the total added so far in May falling to the lowest since October due to soft oil prices.
Drillers added two oil rigs in the week to May 26, bringing the total count up to 722, the most since April 2015, energy services firm Baker Hughes Inc said on Friday.
That is more than double the same week a year ago when there were only 316 active oil rigs, the least in more than six years.
The 19 weeks of rig increases match the longest streak of consecutive additions on record, which ended in August 2011, according to Baker Hughes data going back to 1987.
U.S. crude futures were trading below $50 a barrel on Friday, after plunging nearly 5 percent on Thursday following an OPEC-led decision to extend current production curbs that investors gauged did not go far enough to reduce a global supply glut.
After agreeing in December to cut production by around 1.8 million barrels per day for the first six months of the year, the Organization of the Petroleum Exporting Countries and other producers agreed to extend those curbs for another nine months through the end of March 2018.
Some analysts expect the extended cuts will likely lead to the acceleration of output from U.S. shale oil basins, where producers can operate at much lower costs.
“As a consequence of the extension of the cuts, we are likely to see a more supportive oil price and yet more U.S. shale oil rigs being added to the market over the coming nine months,” said Bjarne Schieldrop, chief commodities analyst at Nordic corporate bank SEB. “In our view, this is likely to flip the global supply/demand balance for 2018 and 2019 into surplus.”
Futures for the balance of 2017 and calendar 2018 were both fetching around $50 a barrel.
Analysts at U.S. financial services firm Cowen & Co said in a note this week that its capital expenditure tracking showed 60 exploration and production (E&P) companies planned to increase spending by an average of 51 percent in 2017 over 2016.
That expected spending increase in 2017 followed an estimated 48 percent decline in 2016 and a 34 percent decline in 2015, Cowen said according to the 64 E&P companies it tracks.
*Scott DiSavino; Editing: Marguerita Choy – Reuters