U.S. energy companies this week added oil rigs for a third week in a row, the longest string of increases since summer, as higher crude prices prompt drillers to return to the well pad after a break in the autumn.
Drillers added two oil rigs in the week to Dec. 8, bringing the total count up to 751, the highest level since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
The U.S. rig count, an early indicator of future output, is still much higher than a year ago when only 498 rigs were active after energy companies boosted spending plans for 2017 as crude started recovering from a two-year price crash around the same time OPEC agreed to the production cuts a year ago.
Last week, the Organization of the Petroleum Exporting Countries and non-OPEC producers led by Russia agreed to extend oil output cuts of about 1.8 million barrels per day until the end of 2018 as they try to finish clearing a global glut of crude.
The increase in U.S. drilling lasted 14 months before stalling in August, September and October as some producers trimmed their 2017 spending plans after prices turned softer over the summer. Energy firms started adding rigs again in November as crude prices rose.
So far in 2017, U.S. crude futures have averaged over $50 a barrel, easily topping last year’s $43.47 average. This week, futures traded near $57 a barrel, just below their highest since June 2015.
Looking ahead, futures were trading near $57 for calendar 2018 and $54 for calendar 2019 .
In anticipation of higher prices than in 2016, exploration and production (E&P) companies increased their spending on U.S. drilling and completions in 2017 by about 53 percent over 2016, according to U.S. financial services firm Cowen & Co.
In addition, Cowen said 17 of the 64 E&Ps they track, including Chevron Corp , have already provided capital expenditure guidance for 2018 indicating a 17 percent increase in planned spending over 2017.
Chevron this week said it planned to boost U.S. upstream capital expenditures to $6.6 billion in 2018 from $5.7 billion in 2017.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week boosted their forecast for the total oil and natural gas rig count to an average of 876 in 2017, 1,001 in 2018 and 1,128 in 2019. Two weeks ago, it forecast 874 in 2017, 927 in 2018 and 1,074 in 2019.
There were 931 oil and natural gas rigs active on Dec. 8. The average number of rigs in service so far in 2017 was 873. That compares with 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
(Reporting by Scott DiSavino; Editing by Marguerita Choy)