U.S. drillers add 13 rigs as crude prices decline

U.S. oil drillers added rigs for the third straight week while the world’s global crude supply — suppressed by Russia’s war against Ukraine — continues to fall short of post-pandemic demand and drives up prices.

The number of operating drill rigs nationally rose by 13 — the largest jump since early April — to 753 this week, according to oil field services company Baker Hughes. Oil and gas companies have added 283 rigs in the past year, a 60 percent increase from the 470 operating at this time last year.

Despite crude’s retreat earlier this year from multiyear highs, the price of oil remains over $100 a barrel, with West Texas Intermediate ending the day at $107.62. Prices declined this week after the Federal Reserve raised interest rates to cool inflation. The Fed’s action, however, hasn’t eased fears of a looming recession.

However, crude oil is still sitting over $100 per barrel, and will likely stay above the triple digit mark through the end of the year, according to the Department of Energy.

Meanwhile, the national average price for gasoline fell this week after the Federal Reserve’s announcement on interest rates. The average price per gallon in Houston is $4.57, down from $4.65 last week, according to AAA. The national average has dipped to $4.92.

Oil prices were already recovering from the pandemic this year, but Moscow’s invasion of Ukraine pushed them higher as countries sanctioned Russian oil and gas.

As a result, Americans are paying record-high prices for gasoline and in some cases double their usual utility bills. U.S. officials have been calling on companies to increase domestic production in hopes of easing prices, including a public back and forth between President Joe Biden and Houston-based oil major Exxon Mobil that led to a

meeting between oil and refinery executives and the U.S. Secretary of Energy this week.

Experts say that while companies are increasing output this year, they’re staying with planned increases instead of rapidly increasing drilling. Investors have been pushing companies to increase shareholder returns and exercise more discipline,.

“You still have had a significant push for a while on public companies to reduce their spend from the upstream, to reduce production, to shift their focus away from traditional carbon based fuels,” said Cliff Vrielink, an energy lawyer at Sidley Austin in Houston. “It’s made it harder for people who are in that sector to expand their production to the extent they might have done so otherwise, so I think you’re still seeing particularly public companies facing a lot of pressures to reduce their spending.”

Additionally, global supply chain snags have made it difficult for producers to get some equipment.

Nonetheless, analysts predict oil and natural gas production in the Permian Basin of West Texas and New Mexico will hit records this year.

West Texas Intermediate was trading around $106 Friday afternoon, down from $111 this time last week.