U.S. energy companies added oil and natural gas drilling rigs this week for the second consecutive week, as high oil prices encourage them to drill more.
Baker Hughes Co, an energy services company, stated that the oil and gas rig count, which is an indicator of future output, rose 9-779 in a week to Nov. 11. This was its highest level since March 2020.
U.S. oil production rose 9 to 622 this past week, its highest level since March 2020. Meanwhile, gas rigs remained steady at 155.
Although the rig count has increased in most months of the last two years, weekly increases have been below zero since March 2020 when the pandemic began. This has helped to maintain oil production at a level below the record levels before the pandemic. Many companies are more concerned with returning money to investors or paying down debt than increasing output.
After heads of oil producers warned about persistent inflation and supply chain restrictions, the U.S. Energy Information Administration cut its crude output growth forecast for next year by 21%.
According to federal energy data, U.S. crude oil production was expected to increase from 11.3 million barrels per day (bpd), in 2021, to 11.8million bpd by 2022 and 12.3million bpd by 2023. This compares to a record 12.3million bpd in 2019.
However, oil prices are still at 17% this year, up from 55% in 2021. There is pressure from the government for more production. Many energy companies have stated that they will increase spending in 2022, after cutting drilling and completion costs in 2019.
Cowen & Co, a U.S. financial service firm, stated that the independent exploration-production (E&P), companies it tracks intend to increase spending by around 40% in 2022 versus 20,21 (up from 38% last Wednesday) and spend about 4% more in 2021 versus 2020.
This is due to a decrease in capital expenditures of approximately 48% in 2020, and 12% in 2019, respectively.
However, some analysts have pointed out that while energy companies do increase their capital expenditures it is not always to increase production. Instead, the money was being used on more expensive equipment and labour costs as a result of rising inflation and supply disruptions.
