US rig count rises to highest since September 2015: Baker Hughes

Canadian rig count down by 20

For the eighth-straight week the US rig count is higher after rising to a level not seen since September, 2015, according to the weekly report issued by Baker Hughes.

In Canada, Baker Hughes reports the rig count fell by 20, ending up at 315.

The increase is due to US shale producers rushing to take advantage of the OPEC supply cut deal and resulting commodity price increases.  This past week, drillers added eight oil rigs, bringing the total to 617.

This time last year, there were 368 rigs operational in the United States.

The increase in rig count occurred despite a slump in oil prices that occurred after reports of ballooning US crude inventories.

“We will not see the impact of this week’s crude price collapse for another couple of months,” James Williams, president of energy consultant WTRG Economics told Reuters, adding “if crude prices rebound next week, this week’s price drop won’t matter at all as far as the rig count is concerned.”

US crude futures fell to their lowest point since November, landing at around $48/barrel on Friday.

Since last May when crude prices broke the $50/barrel mark, drillers have added 301 oil rigs in 37 of the past 41 weeks.  This is the largest recovery in rigs since the global supply glut slammed the market in mid-2014.

On Wednesday, Marathon Oil said it plans to spend $1.1 billion to purchase 70,000 acres in the Permian Basin, where it will add a drilling rig.  Marathon is not alone.  Exxon, Pioneer Natural Resources and other oil firms have staked their claims and ramped up operations in one of the lowest-cost production areas in the US.

At CERAWeek in Houston this week, US shale producers like Hess, Chesapeake Energy, Continental Resources and others said they would also be expanding operations in the Bakken, Oklahoma and in other shale producing areas.

Oil production in North Dakota increased to 980,000 b/d in January.

Amidst all the industry optimism, reports show that after nine consecutive weeks of builds, US crude inventories also rose to a record high last week.  The EIA is also forecasting US production will rise from 8.9 million b/d in 2016 to 9.2 million b/d this year and 9.6 million b/d in 2018.

At a closed-door meeting at CERAWeek, Saudi oil officials have cautioned top US independent oil firms that they should not assume OPEC will extend the supply cut pact to offset rising US production, according to Reuters.

Also at CERAWeek, Saudi Arabia’s Energy Minister Khalid al-Falih said there would be no “free rides” for US shale producers benefitting from the upturn.