U.S. energy companies added oil rigs for a third week in a row as energy firms follow through on plans to spend more on drilling this year with crude prices near three-year highs.
Drillers added five oil rigs in the week to April 20,bringing the total count to 820, the highest level since March 2015, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
More than half the total oil rigs are in the Permian basin in west Texas and eastern New Mexico. Active units there increased by eight this week to 453, the most since January 2015.
The U.S. government expects oil output in the Permian to rise to a record high near 3.2 million barrels per day in May,about 30 percent of total U.S. oil production.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 688 rigs were active. Energy companies have been steadily increasing spending since mid-2016 when crude prices began recovering from a two-year crash.
U.S. crude futures traded over $69 a barrel earlier this week, their highest since November 2014, but pulled back to around $68 on Friday. That is up sharply from the $50.85 average hit in 2017 and $43.47 in 2016.
Looking ahead, futures were trading around $67 for the balance of 2018 and $61 for calendar 2019 .
In anticipation of higher prices, U.S. financial services firm Cowen & Co said 58 of the roughly 65 exploration and production (E&P) companies they track have already provided guidance indicating an 11 percent increase this year in planned capital spending.
Cowen said those E&Ps that have reported capital plans for 2018 expected to spend a total of $80.5 billion in 2018, up from an estimated $72.4 billion in 2017.
Analysts at Simmons & Co, energy specialists at U.S.investment bank Piper Jaffray, this week forecast the total oiland natural gas rig count would average 1,014 in 2018 and 1,129 in 2019. That compares with last week’s forecast of 1,013 in2018 and 1,129 in 2019.
So far this year, the total number of oil and natural gas rigs active in the United States has averaged 974, up sharply from an average of 876 rigs in 2017 and 509 in 2016, and not far from the total of 978 in 2015. Most rigs produce both oil and gas.