Oil futures hit their 2016 high
Nation’s rig count climbs by four as OPEC reaches deal on output
U.S. oil and gas companies put more drilling rigs into operation this week as oil climbed to its highest price of the year after this week’s agreement by OPEC to cut production.
Drillers added a net four rigs to the oil patch, largely due to increased activity in West Texas’ Permian Basin, which added seven and helped offset losses in North Dakota, Colorado and Louisiana, according the Houston energy services provider Baker Hughes. Production companies also added two rigs in the Eagle Ford Shale in South Texas.
The rig count has followed rising oil prices, which received a jolt after the Organization for the Petroleum Exporting Countries on Wednesday made final an agreement to cut output by 1.2 million barrels a day. Crude has surged 14 percent since Tuesday, settling Friday at $51.68, the highest close of 2016. It was also the biggest weekly gain for oil in more than year.
The oil and gas industry has been slowly climbing out of a two-year oil
bust that began in the summer of 2014, when prices peaked at about $107 a barrel, but eventually plunged to a low of $26 a barrel in February. The rig count also plummeted from about 1,900 in 2014 to just over 400 in May.
Since then, drillers have put nearly 200 oil and gas rigs back into operation, bringing the U.S. rig count to 597, of which 477 are oil rigs. Much of that growth has occurred in the Permian Basin, a particularly productive shale play where drillers can make money at prices below $50 a barrel. The Permian now accounts for 235 rigs, almost half of the nation’s oil rigs.
Companies have been snapping up land and mineral rights, and developing oil fields in the prolific basin. The oil major Chevron, for example, spends $1.5 billion annually in the Permian and expects to increase investments there in coming years.
The next most active area is Texas’ Eagle Ford shale with 40 rigs, according to the Baker Hughes data.