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US rig count up for 2nd week in a row: Baker Hughes

US rig count up as oil hits 11-month high

rig count

The US rig count increased to 328, up for the week, but down significantly compared to this time last year.  Apache photo.

June 10 (Reuters) – U.S. energy firms this week added rigs drilling for oil for a second week in a row for the first time since August, energy services firm Baker Hughes Inc said on Friday, after crude prices this week rallied to an 11-month high over $51 a barrel.

Analysts and producers have said U.S. crude prices over $50 would trigger a return to the well pad after a near two-year slump in drilling. Drillers added three oil rigs in the week to June 10, bringing the total rig count up to 328, compared with 635 a year ago, Baker Hughes said in its closely followed report.

Before this week, drillers have added rigs in only two weeks so far this year, cutting on average 10 oil rigs per week for a total of 211.

That compares with cuts of 18 rigs per week on average in 2015 for a total decline of 963, the biggest annual decline since at least 1988 amid the biggest rout in crude prices in a generation.

The rig count has dropped since hitting a peak of 1,609 in October 2014 as U.S. crude futures fell from over $107 a barrel mid-2014 to a near 13-year low around $26 in February. Since then, crude futures have almost doubled, breaking through $51 this week as U.S. inventories declined and on supply worries in Nigeria.

On Friday, however, futures were under pressure, falling nearly 3 percent to around $49.15, amid another rise in the rig count and as a strong dollar weighs on demand.

“Barring another commodity price collapse, we do believe the bottom is in for the rig count. We expect rig counts to remain choppy for the remainder of the summer with potential increases later in the third quarter to early fourth quarter,” analysts at U.S. financial service firm Cowen & Co said in a note this week.

Cowen forecast the total oil and natural gas land rig count would increase by about 315 rigs to 697 rigs by the fourth quarter of 2017.

While that is less than the 400-rig increase expected by some other firms, Cowen said oil prices would have to rise to around $63 a barrel to cause drillers to add that many rigs.

That is much higher than current crude futures, which are fetching nearly $51 for the balance of 2016 and over $52 for calendar 2017.

“There are some signs that rigs may be returning in the best acreage, namely the best counties in the Permian Basin,” analysts at Morgan Stanley said in a report.

(Reporting by Scott DiSavino; Editing by Marguerita Choy)

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