June 23, 2017 / 6:35 PM / a month ago

UPDATE 1-U.S. drillers add oil rigs for record 23rd week in a row -Baker Hughes

4 Min Read

 (Adds Bakken rig details, quotes)
    June 23 (Reuters) - U.S. energy firms added oil rigs for a
record 23rd week in a row, extending a year-long drilling
recovery as producers boost spending on expectations crude
prices will rise in future months despite this week's decline to
a 10-month low.
    Drillers added 11 oil rigs in the week to June 23, bringing
the total count up to 758, the most since April 2015, energy
services firm Baker Hughes Inc         said in its closely
followed report on Friday. RIG-OL-USA-BHI 
    That is more than double the same week a year ago when there
were only 330 active oil rigs. Drillers have added rigs in 52 of
the past 56 weeks since the start of June 2016.
    "The higher rig count this week reflects decisions made a
couple of months ago when oil prices were higher," said James
Williams, president of WTRG Economics in Arkansas, noting he
expects the current low prices to cause the count to fall in
some weeks over the next month or two.
    U.S. crude futures        were trading around $43 per
barrel, which puts the front-month on track for a fifth
consecutive week of declines and close to a 10-month low as
OPEC-led production cuts have failed to reduce a global crude
glut.      
    After agreeing in December to cut production by around 1.8
million barrels per day (bpd) from January-June, OPEC and other
producers in late May agreed to extend those cuts for another
nine months through the end of March 2018.             
    Analysts said those OPEC-led cuts were being frustrated by
rising output from U.S. shale drillers and other producers
hoping to capture higher oil prices in future months.
    Futures for the balance of 2017           were trading just
over $43 a barrel, while calendar 2018           was fetching
about $45 a barrel.
    Analysts said crude prices are likely to remain under
pressure until there are signs the number of rigs drilling for
oil in the United States is stabilizing or declining.
            
    U.S. producers are expected to increase output to 9.3
million bpd in 2017 and a record 10.0 million bpd in 2018 from
8.9 million bpd in 2016, according to federal projections.
         
    The biggest increase in rigs this week was in the Bakken
formation in North Dakota where drillers added three rigs,
bringing the total there to 52, the most since December 2015 and
double the same week a year ago.
    "It's not surprising the rig count has been rising in the
Bakken because producers there will not see the full extent of
the crude price drop we've had over the past month," Williams at
WTRG said.
    "They just got access to a new pipeline, which will reduce
the cost of transporting their crude by train," he said,
referring to the Dakota Access pipeline that entered service at
the start of June.
    The break even price for drilling new wells in the United
States varies considerably among shale formations and even
between different parts of the same play, but most analysts say
producers need U.S. crude prices of $45-$50.             
    However, consultancy Rystad Energy, which specializes in
exploration and production, said wellhead break-evens average
around $38 per barrel for the Bakken shale wells completed in
2016-2017.             

    
 (Reporting by Scott DiSavino; Editing by Marguerita Choy)
  
 
 

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