The number of rigs drilling for oil in the United States rose again this week, extending one of its best recoveries with no cuts for 16 straight weeks, with analysts expecting more additions as crude prices hold over $50 a barrel.
Drillers added 4 oil rigs in the week to Oct. 14, bringing the count up to 432, the most since February, but still below 595 rigs a year ago, according to energy services firm Baker Hughes Inc on Friday.
That 16-week streak of not cutting rigs was the third longest since 1987, following 19 weeks in 2011 and 17 weeks ended in 2010.
The Baker Hughes oil rig count plunged from a record high of 1,609 in October 2014 to a six-year low of 316 in May after crude prices collapsed from over $107 a barrel in June 2014 to near $26 in February 2016 due to a global oil glut.
But since U.S. crude briefly climbed over $50 a barrel in May and June, drillers have added 116 oil rigs. Analysts said prices over $50 were high enough to prompt energy firms to return to the well pad.
U.S. crude futures held over $50 a barrel for most of this week, underpinned by OPEC’s deal to reduce oil production. That put the front-month on track to rise for a fourth straight week, gaining about 17 percent during that time.
Looking ahead, analysts forecast energy firms would boost spending to capture higher oil prices expected in 2017 and 2018.
Futures were trading around $53 a barrel for calendar 2017 and over $54 for calendar 2018.
“Following OPEC news and recovery in futures prices, we are modestly increasing our 2017 and 2018 U.S. drilling and completion spending estimates,” analysts at U.S. financial services firm Cowen & Co said in a report this week.
Cowen, which estimated every $5 change in U.S. oil prices equates to $10 billion in extra spending and 85 horizontal rigs, expected companies it follows to spend $78 billion on drilling and completions in 2017 and $88 billion in 2018.
That was up from the firm’s prior estimate of $72 billion for 2017 and $81 billion for 2018. Cowen forecast the companies it follows spent about $54 billion in 2016, down from $96 billion in 2015.
Cowen said it expects the total U.S. oil and natural gas rig count to rise to 609 in 2017 and 701 in 2018, up 26 percent and 15 percent, respectively, from its prior estimates.
That compares with an average of 978 oil and gas rigs active in 2015 and 483 so far this year, according to Baker Hughes data.
Source: Reuters (Reporting by Scott DiSavino; Editing by Meredith Mazzilli)