U.S. energy firms this week added oil and natural gas rigs for a seventh week in a row as higher energy prices have prompted producers to pull more fuel out of the ground in recent months.
The oil and gas rig count, an early indicator of future output, rose nine to 360 in the week to Jan. 8, its highest since May, energy services firm Baker Hughes Co said in its closely followed report on Friday.
Despite the gains in recent months, that count was still 421 rigs, or 54%, below this time last year.
U.S. oil rigs rose eight to 275 this week, their highest since May, while gas rigs rose one to 84, their highest since April, according to Baker Hughes data.
U.S. crude futures soared to almost $52 this week, their highest since February 2020.
Those higher prices have already encouraged energy firms to drill much more since the total rig count fell to a record low of 244 in August, according to Baker Hughes data going back to 1940. While the rig count fell by 454 in 2020, its second annual decline in a row, it rose in the fourth quarter in its biggest increase since the second quarter of 2017.
Looking forward, however, U.S. crude futures were trading lower at around $51 a barrel for the balance of 2021 and $48 for calendar 2022, which could prompt producers to reduce activity.
Analysts at Raymond James said they “anticipate the pace of the recovery to remain slow for several reasons,” including energy firms’ focus on free cash flow generation and continued consolidation in the industry.
Activity during the first half of 2021 “is likely focused on completing DUCs (drilled but uncompleted wells) that were drilled in 2020 implying that any meaningful rig additions won’t arrive until (the second quarter of 2021) at the earliest,” Raymond James said, noting the total rig count would likely end 2021 at around 400.29dk2902l