U.S. energy firms this week added oil and natural gas rigs for a second week in a row as crude prices rose to their highest since 2018, prompting some drillers to return to the wellpad.
The oil and gas rig count, an early indicator of future output, rose nine to 470 in the week to June 18, its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.
The total rig count was up 204 rigs, or 77%, over this time last year. It was also up 93% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940.
U.S. oil rigs rose eight to 373 this week, their highest since April 2020, while gas rigs rose one to 97, their first increase in six weeks, according to Baker Hughes.
U.S. crude futures were trading below $72 a barrel on Friday, close to its highest since October 2018.
With prices mostly rising since October 2020, some energy firms plan to raise spending after cutting drilling and completion expenditures over the past two years, although most are still focusing on capital discipline and investor returns, rather than expanding supply.
“We are maintaining a view that many shale producers will find current high prices too difficult to ignore and, as a result, (the government’s) reported increase in total U.S. production… could easily be followed by additional gradual gains,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
U.S. crude production last week rose to 11.2 million barrels per day (bpd), its highest since May 2020, according to data from the U.S. Energy Information Administration (EIA) on Wednesday.
U.S. shale oil output usually responds rapidly to price signals and the EIA this week forecast production from seven major shale formations would rise 38,000 bpd in July to about 7.8 million bpd.
However, OPEC officials heard from industry experts that U.S. oil output growth will likely remain limited in 2021 despite rising prices, OPEC sources told Reuters.
“The general sentiment regarding shale was it will come back as prices go up but not super fast,” said a source at one of the companies that provided forecasts to OPEC.
In fact, many analysts do not expect that extra spending to boost output at all. Instead, they think it will only replace natural declines in well production.