US Oil Drillers Add Rigs in Permian and Bakken

Oil drillers added rigs in the Permian and Bakken shale basins this week, data showed on Friday, another sign that higher crude prices are coaxing producers back to the well pad after a six-month slump in activity.

 

Overall, however, U.S. drillers reduced the number of active rigs by four this week, oil services company Baker Hughes Inc said in its closely followed report.

 

It was the 28th straight weekly decline and brought the total down to 631, the lowest since August 2010.

 

U.S. crude oil futures fell toward $59 a barrel on Friday as concern over Greece and forecasts from U.S. shale oil producers that oil output would keep growing this year countered signs of a pickup in demand.

 

"As long as the drop in rigs fails to translate into a reduction in production, (it) will be unable to sustain price advances," said Jim Ritterbusch of Ritterbusch and Associates, an energy consulting firm, in Illinois. He expects the rig count to increase by the end of the month.

 

U.S. crude production has held around 9.6 million barrels a day for the last four weeks, its highest level since the early 1970s, according to government data, despite drillers efforts to slash spending.

 

U.S. drillers over the past six months have eliminated thousands of jobs and idled more than half of their oil rigs since the number of rigs peaked at a record 1,609 in October.

 

U.S. crude futures fell more than 60 percent from around $107 a barrel last June to a six-year low near $42 in March as producers in the United States, the Organization of the Petroleum Exporting Countries and elsewhere pulled near record amounts of oil out of the ground despite lackluster world demand.

 

OPEC kept producing oil to retain its market share by driving out more expensive producers like U.S. shale oil drillers and to keep prices low enough to encourage demand growth.

 

And OPEC's plan worked, sort of.

 

U.S. energy firms did cut spending but are expected to ramp up drilling again now that U.S. crude futures have recovered to average around $60 a barrel since the start of May.

 

"U.S. producers will ramp up activity given improved returns with costs down nearly 30 percent and producers increasingly comfortable at the current cost, revenue and funding mix," analysts at Goldman Sachs, a bank, said this week.