The fourth week of U.S. oil and natural gas production was added by U.S. energy companies last week. This is as the federal government seeks to increase production in order to help allies get off Russian oil and gas after Moscow invaded Ukraine on February 24.
The Kremlin describes its actions in Ukraine as “special military operations.”
In its closely watched report, Baker Hughes Co stated that the oil and gas rig count, which is an indicator of future output, rose to 693 in the week to April 14. This was its highest level since March 2020.
U.S. oil and gas rigs increased by two to 548 this week, their highest level since April 2020. Gas rigs climbed two to 143, their highest levels since October 2019.
The rig count has increased for a record 20 consecutive months through March. However, weekly increases have mainly been in single figures and oil production remains far below pre-pandemic records levels. Many companies are more focused on returning money to investors and reducing debt than increasing output.
Analysts at East Daley stated that the oil and gas industry is under increasing political pressure to drill more in the wake of Russia’s attack on Ukraine. They also included a new proposal from President Joe Biden about federal leasing.
According to federal energy data, U.S. crude oil production was expected to increase from 11.2 million barrels per day in 2021 to 12.0million bpd by 2022 and 13.0million bpd by 2023. This compares to a record 12.3million bpd in 2019.
However, oil prices are up 40% this year, after rising 55% in 2021. A growing number of energy companies said that they will increase spending in 2022 for the second consecutive year. This follows a reduction in drilling and completion costs in 2019 and 2020.
However, the 2021 spending increase was modest and most of it went towards completing wells that were drilled in the past. These wells are known as DUC (drilled but not completed) wells.
Analysts believe the industry needs to drill new wells as the supply of DUCs is rapidly decreasing.
The Permian in Texas and New Mexico, which is the country’s largest oil shale area, was already seeing a drilling boom.
“The Permian surge in permit activity positions the industry for continuous additions to rig counts in the second half 2022 and foreshadows an increase in supply capacity starting in early 2023,” Artem Abramov from Rystad Energy, head of shale Research.
