U.S. energy companies added oil and natural gas drilling rigs this week for the fourth consecutive week. Crude prices reached a seven-year high last Wednesday, prompting some drillers back to the wellpad.
Baker Hughes Co, an energy services company, reported that the oil and gas rig count, which is an indicator of future output, rose 7 to 563 in the week to Nov. 19. This was its highest level since April 2020.
This brings the total number of rigs to 253 rigs, 82% more than last year.
U.S. oil production rose 7 to 461 this week, their highest level since April 2020. Gas rigs remained steady at 102.
U.S. crude oil futures closed at their highest level since October 2014, closing at $76 per barrel Friday. This was due to rising COVID-19 case numbers in Europe that threatened to slow down the economic recovery. [O/R]
However, with oil prices up at 57% this year some energy companies said that they will increase spending in 2021 or 2022 after cutting drilling costs and completions expenditures in 2019 or 2020.
Strangely, a larger price rise in natural gas futures – up 96% so far this fiscal year – hasn’t encouraged drillers to look for more gas.
The number of oil rigs increased by 73% over the previous year. However, the number of active gas drilling rigs increased only 23%.
Even though there were no new wells being drilled, the U.S. Energy Information Administration projected that gas output from the largest shale basins would reach a record for December 7, even though they weren’t drilling any new wells.
This is partly because companies were finishing oil and gas wells that had been drilled years ago. Analysts predict that drilling will need to increase or production will drop as the number of uncompleted (DUCs), wells drops.
According to the EIA, 649 oil-and-gas wells were drilled by producers and 871 were completed in the largest shale basins. In October, there were 5,104 DUCs. This is the lowest level since December 2014.
According to EIA data, it was the 16th consecutive month that DUCs decreased. This streak is the longest on record.
Analysts at JBC Energy stated in a note that DUC inventories are at such high levels that U.S. shale producers must increase drilling operations in the coming months to offset any further declines incompletions.
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