Oil explorers deployed more rigs for the first time in four weeks as shrinking drilling costs outweighed concern about sliding crude prices.
Working American oil rigs rose by three this week to 800, according to data released Friday by oilfield-services provider Baker Hughes. The Permian Basin and Eagle Ford shale -- two of the nation’s busiest shale fields -- both saw an increase in drilling.
Some U.S. shale drillers need as little as $23 a barrel for their crude to turn a profit and the nationwide average is $50, down 4% in the past year, according to a Federal Reserve Bank of Dallas survey of oil executives. That means explorers have been somewhat insulated from May’s 14% tumble in crude prices.
Expectations of “still being cash flow positive” are driving drilling decisions, Ryan Giannotto, Director of Research at GraniteShares Inc., said in a telephone interview.
Despite the gain this week, the general downward trend since late 2018 bodes ill for rig operators, according to Infill Thinking LLC. Just 16% of the explorers surveyed by Infill indicated they plan to deploy more rigs this year.
“We did not come away with a warm and fuzzy feeling on the back half of the year for oilfield activity,” Infill analysts led by Joseph Triepke said in a note to clients. “The trend is clearly negative” for rig owners.
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