Drillers added rigs in U.S. oilfields for the seventh time in the past eight weeks as declining crude prices fail to hold back activity.
Rigs targeting oil in the U.S. rose by 2 to 674 this week, the highest since the last week of April, Baker Hughes Inc. said on its website Friday. Drilling equipment added in the Williston Basin of North Dakota and other shale plays more than offset a declining count in areas like Texas’ Eagle Ford and Permian formations.
The crude being pumped out of shale rock in the U.S. has helped create a global glut that pushed prices in New York below $40 a barrel for the first time in more than six years on Friday. At such low prices, the recent drilling increase may be short-lived, and the rig count remains almost 60 percent lower than in October.
“We hit bottom, we bounced off the bottom a little bit, but we’re just sort of skating along the bottom,” James Williams, president energy consultancy WTRG Economics, said by phone from London, Arkansas. “With $40-a-barrel oil prices, two months from now we’re going to see another step down.”
The Williston added three oil rigs for a total of 73, while the Eagle Ford and Permian combined to lose eight.
West Texas Intermediate for October delivery dropped 69 cents, or 1.7 percent, to settle at $40.45 a barrel on the New York Mercantile Exchange. It touched $39.86, the lowest level for a front-month contract since March 2009.
And it could get worse. Oil may fall to lows last seen during the global financial crisis amid a persistent supply surplus, Citigroup Inc. said on Aug. 19.
“Balances point to further oversupply throughout 2015, begging the question how low can oil go?” Citigroup analysts led by Seth Kleinman said in the report. The U.S. crude price of $32.40 a barrel reached in 2008 “is a conceivable reality.”
Oil moved into a bear market in July, with prices almost 35 percent down from this year’s highest close in June, and the biggest producers are preparing for an extended downturn.
Traders have been tracking the rig counts as they try to determine when U.S. oil production will fall enough to support higher prices. The use of new technology that helps drillers pump more with fewer rigs has made that task more difficult.
Crude output in the U.S. dropped by 47,000 barrels a day to 9.35 million last week, but remains almost 70 percent higher than four years ago, Energy Information Administration data show.