U.S. energy companies this week added the most oil rigs in nearly four years, extending an eight-month recovery as drillers take advantage of a deal by OPEC to cut supplies that has boosted prices over $50 a barrel since early December.
Drillers added 29 oil rigs in the week to Jan. 20, bringing the total count up to 551, the most since November 2015, energy services firm Baker Hughes Inc said on Friday. During the same week a year ago, there were 510 active oil rigs.
Since crude prices first topped $50 a barrel in May after recovering from 13-year lows in February, drillers have added a total of 235 oil rigs in 30 of the past 34 weeks, the biggest recovery in rigs since a global oil glut crushed the market over two years starting in mid 2014.
Almost two-thirds of the rigs added since May were in the Permian basin, the nation's biggest shale oil formation located in west Texas and eastern New Mexico. Drillers this week added 13 rigs there, the most in a week since March 2014, bringing the total up to 281, the highest since March 2015.
Another basin that picked up a lot of rigs this week was Cana Woodford in Oklahoma, which gained nine rigs bringing the total there up to 45, the most in that basin since at least 2011, according to Baker Hughes data going back that far.
The Baker Hughes oil rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May as U.S. crude collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.
U.S. crude futures were trading above $52 a barrel on Friday as growing U.S. production offset some of the cuts planned by the Organization of the Petroleum Exporting Countries (OPEC) and other producers.
Analysts said they expect U.S. energy firms to boost spending on drilling and pump more oil and natural gas from shale fields in coming years now that energy prices are projected to keep climbing.
Futures for the balance of 2017 were trading around $55 a barrel, while calendar 2018 was fetching almost $56.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and gas rig count would average 754 in 2017, 868 in 2018 and 979 in 2019.
Most wells produce both oil and gas. That compares with 694 oil and gas rigs this week, and an average of 509 in 2016 and 978 in 2015, according to Baker Hughes data.
Analysts at U.S. financial services firm Cowen & Co said in a note this week that its capital expenditure tracking showed 27 exploration and production (E&P) companies planned to increase spending by an average of 34 percent in 2017 over 2016.
That spending increase in 2017 followed an estimated 47 percent decline in 2016 and a 35 percent decline in 2015, Cowen said according to the 65 E&P companies it tracks.
U.S. oil production was rebounding, led by light tight oil, also commonly known as shale oil, as exploration drilling increased and wells became more efficient, the International Energy Agency said on Thursday.
On average, the IEA said in its monthly report, it expected U.S. light tight production to grow by closer to 170,000 barrels per day in 2017, after falling by nearly 300,000 bpd in 2016.
The head of the IEA, Fatih Birol, said in Davos, Switzerland, on Thursday that he expected U.S. shale oil output to rebound by as much as 500,000 bpd over the course of 2017, which would be a new record.
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