U.S. energy firms this week added oil and natural gas rigs for the ninth time in 10 weeks after Russia’s invasion of Ukraine drove crude prices to their highest since 2008.
The oil and gas rig count, an early indicator of future output, rose 13 to 663 in the week to March 11, its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.
Baker Hughes said that puts the total rig count up 261 rigs, or 65%, over this time last year.
U.S. oil rigs rose eight to 527 this week, their highest since April 2020, while gas rigs gained rose five to 135, their highest since October 2019.
U.S. crude futures traded over $130 per barrel this week, their highest since July 2008 as Russia’s Feb. 24 invasion of Ukraine stoked global energy supply concerns.
While high prices should boost profits, producers fear expensive oil could also sap demand, and huge new investments in drilling will produce oil only after the crisis has passed.
“What we don’t want to do as a company, and I don’t think anyone in the industry wants to do, is try to chase prices up in the short term and have that run-up be ultimately ineffective,” Chesapeake CEO Domenic Dell’Osso said in an interview at CERAWeek conference this week.
Even though the rig count has climbed for a record 19 months in a row, the weekly increases have mostly been in single digits and oil production is still far from pre-pandemic record levels as many companies focus more on returning money to investors rather than boosting output.
“Rig activity across the five largest U.S. oil plays would need to increase by about three every week over the next eight weeks to reach a sustainable plateau to hold current oil volumes in 2022,” analysts at Mizuho, a bank, said in a report.
U.S. crude production was on track to rise from 11.2 million barrels per day (bpd) in 2021 to 12.0 million bpd in 2022 and 13.0 million bpd in 2023, according to federal energy data. That compares with a record 12.3 million bpd in 2019.
With oil prices up about 44% so far this year after soaring 55% in 2021, a growing number of energy firms said they plan to boost spending for a second year in a row in 2022 after cutting drilling and completion expenditures in 2019 and 2020.
However, shale producers are unlikely to replace banned Russian oil imports due to a shortage of oilfield materials, equipment and labor and a dwindling backlog of wells waiting to be completed, energy executives and analysts said at CERAWeek.