U.S. oil firms reduced the number of active U.S. oil rigs this week, even though crude prices continued to trade above $100 per barrel after Russia’s invasion of Ukraine. This has fueled global energy supply worries.
This was the second drop in oil rig count over the past three weeks. It had fallen three times in the week ending March 4, rose eight in the week ending March 11, and dropped three in the week ending March 18.
Despite the drop in oil rigs, the total number of rigs remained the same because drillers added some natural gases this week.
In its closely watched report Friday, Baker Hughes Co reported that the total U.S. oil rig count, which is an indicator of future output, remained steady at 663 for the week to March 18.
Baker Hughes stated that the total oil-and-gas count is now up 252 or 61% over last year.
U.S. oil and gas rigs declined three to 524, while they rose two to 137 this week, their highest level since October 2019. Baker Hughes also said that one additional miscellaneous oil rig was added.
U.S. crude oil futures traded at $105 per barrel Friday, an increase of more than 10% since Russia invaded Ukraine on February 24.
The rig count has increased for 19 consecutive months, but the weekly increases were mainly in single digits. Oil production is still below pre-pandemic levels. Many companies are more concerned with returning money to investors than increasing output.
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 a 13.0million bpd by 2023. This compares to a record 12.3million bpd in 2019.
Oil prices are up 39% this year, after rising 55% in 2021. A growing number of energy companies said that they intend to increase spending in 2022. This comes after cutting 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.
According to data back to December 2013, the U.S. Energy Information Administration (EIA), the number of DUCs in the largest shale basins decreased for the 20th consecutive month to 4,372 in February. This is their lowest level since December 2013.
Analysts have known for months that energy companies will need to drill more wells soon to make sure they have enough DUCs.
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