US Oil Rig Count Steady for First Time This Year

 

Drillers kept the number of rigs at 318 in the week to May 20, holding at the lowest level since October 2009, Baker Hughes said in its closely followed report.

 

Prior to this week, drillers added only one rig so far this year during the week of March 18. On average, they cut 11 oil rigs per week for a total of 218 so far this year.

 

The number of U.S. oil rigs currently operating compares with the 659 rigs operating in the same week a year ago. In 2015, drillers cut on average 18 oil rigs per week for a total of 963 for the year, the biggest annual decline since at least 1988 amid the biggest rout in crude prices in a generation.

 

Energy firms have sharply reduced oil and gas drilling since the collapse in crude markets began in mid-2014 as U.S. crude futures fell from over $107 a barrel to a near 13-year low around $26 in February.

 

But with U.S. crude futures settling over $48 a barrel much of the week on production worries in Nigeria and Venezuela, most analysts expect the number of rigs to stop falling soon before edging up later this year with prices expected to rise in coming months. 

 

U.S. crude futures were fetching over $49 for the balance of 2016 and under $51 for calendar 2017.

 

U.S. investment banking advisory Evercore ISI said it expects drilling to pick up in the next quarter based in part on the number of drilling permits.

 

U.S. land permits totaled 2,099 in April, up a solid 15 percent from March, but down 33 percent year-on-year, Evercore said.

 

"We still expect permitting to show favorable month-on-month growth in states like Texas and New Mexico, as the Permian and Eagle Ford will likely be the first-move shale plays for producers looking to put rigs back to work in 2017," Evercore said.

 

Evercore expects to exit the second quarter with about 376 total rigs. After that the third quarter will average 401 rigs, implying a three rig increase per week starting in July. Baker Hughes said there were 406 total rigs in the week ended May 13.