U.S. energy companies added oil and natural gas drilling rigs for the record 18th consecutive month. This was after increasing the rig count this week in response to rising oil prices. More drillers are returning to the wellpad.
Baker Hughes Co, an energy services company, stated that the oil and gas rig count, which is an indicator of future output, rose 6% to 610 in the week of Jan. 28. This was its highest level since April 2020.
The number of oil and gas rigs increased by 24 in January.
Analysts noted that the rig count rose for 18 consecutive months, but U.S. production fell in 2021 because many energy companies were more focused on returning money to investors than increasing output.
Baker Hughes reported that the total number of rigs was up 226 or 59% over last year.
U.S. oil rigs increased four to 495 this week, their highest level since April 2020. They also jumped by fifteen in January, increasing for a 17th consecutive month. This was the longest run of gains since January 2011.
The weekly gas rig increase was two to 115, which is their highest since January 2020. In January, they rose by seven, their largest monthly gain since December 2018.
U.S. crude oil futures traded at $87 per barrel last week. This is their highest level since October 2014. It also means that the contract could rise for the sixth consecutive week for the first time since Oct 2021.
After reducing drilling and completion costs in 2019, and 2020, oil prices are up 16% this year.
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 “drilled but not completed” (DUC) wells.
Analysts stated that the industry must continue drilling new wells because there was a rapid drop in the available DUCs.
According to the government’s latest report, DUCs in the largest shale basins fell to 4,616 in December, their lowest level since March 2014. Read more
Mizuho analysts stated this week that the inventory relative to total production is less than half of its 2018-2019 average.
According to them, the average rig gain over the past four weeks was about one and rig activity across five of the largest U.S. oil play would have to rise by 12 weekly over the next eight weeks in order to maintain current oil volumes through 2022.
