Shale Explorers Boost Activity Further After OPEC ‘Lifeline’by and
Growth comes while none of four biggest oil fields add rigs
Total U.S. oil rig count hasn’t fallen since late June
Explorers added oil rigs in the U.S. for a sixth consecutive week after OPEC’s pledge to cut output triggered a crude market rally, allowing producers to lock in higher prices with hedge contracts.
Rigs targeting crude in the U.S. rose by 3 to 428, adding to the largest level of work since February. Producers haven’t pulled back activity since the end of June. Natural gas rigs fell by 2 to 94 this week, while miscellaneous rigs rose by 1 to 2, bringing the total for oil and gas up by 2 to 524. Despite the overall activity boost, none of the four largest oil basins added rigs.
"Companies are looking at areas that are under-explored or under-developed," James Williams, president of WTRG Economics in London, Arkansas, said Friday in a phone interview. "But what we’re going to see is continued growth in the major oil plays."
Oil breached $50 a barrel for the first time since June this week after the Organization of Petroleum Exporting Countries agreed to the first production cut in eight years. By resuming its policy to balance the market, the group threw a “lifeline” to U.S. shale firms and prompted them to hedge “in droves,” Harry Tchilinguirian, head of commodity research at BNP Paribas SA in London, said last week.
“Every time prices get above the $50 range we see a lot of activity coming in from producers selling into the rally,” said Hamza Khan, an analyst at ING Bank NV in Amsterdam.
Crude output fell by 30,000 barrels a day to 8.47 million last week, the Energy Information Administration reported Wednesday.
The oil price recovery from a 12-year-low in February prompted producers to begin returning parked rigs to service after idling more than 1,000 rigs since the start of last year. West Texas Intermediate, the U.S. benchmark crude, fell 1.4 percent to $49.73 at 1:15 p.m. on the New York Mercantile Exchange.
"If the oil price is near current levels two months from now, there’s going to be a significant growth in oil based off of the $50 price we’ve seen," Williams said. "So you’ll also see more oil drilling come November and December."