Shale drillers brought back the most oil rigs of any week this year as confidence in a stabilized market is prompting talk of expansion throughout 2016.
Rigs targeting crude in the U.S. rose by 11 to 341 last week, after 7 were dropped the previous week, Baker Hughes Inc. said on its website Friday. It’s the fourth time in the past five weeks that producers have added oil rigs. Explorers in the Permian Basin of West Texas, the nation’s busiest oil patch, again led the activity climb by adding 4 for a total of 154 oil rigs working in the region.
"You’re seeing rig counts added in the right places, like the Permian," Luke Lemoine, an analyst at Capital One Southcoast in New Orleans, said in a phone interview. "There have been a lot of cuts in the industry, so a lot of wounds to heal. It’s understandable that the first steps would be small."
Supply disruptions and falling U.S. output have helped cut a global surplus, with both the International Energy Agency and the Organization of Petroleum Exporting Countries forecasting that the market is heading toward balance as demand growth outpaces supply.
A Balancing Market
"With oil prices approaching $50 per barrel for WTI as supply and demand move into balance, operational visibility is beginning to improve," Patrick Schorn, president of operations at Schlumberger Ltd., told investors last week at the Wells Fargo West Coast Energy Conference in San Francisco. "The rig count is now expected to increase on land during the next two quarters."
West Texas Intermediate, the U.S. benchmark for crude, rose 1.4 percent to settle at $48.99 on the New York Mercantile Exchange.
America’s oil drillers have been mostly idling rigs since October 2014 as the world’s largest crude suppliers battle for market share. U.S. crude output fell by 55,000 barrels a day to 8.62 million through June 24, Energy Information Administration data show.
To stem current production declines, Lemoine estimates explorers would need to run 530 to 610 oil rigs in the U.S.
"It might not pop back as quickly as people expect," he said. "People want to be cautious."
Natural gas rigs were trimmed by 1 to 89 this week, bringing the total for oil and gas up by 10 to 431, Baker Hughes data show.
© 2016 Bloomberg L.P