US oil producers put more rigs back to work, marking the highest level of activity since February as crude markets headed for a second monthly gain.
Rigs targeting crude in the U.S. rose a fifth consecutive week, up 7 to 425, Baker Hughes Inc., said on its website Friday. Explorers have added 109 rigs since the end of May. Natural gas rigs rose by 4 to 96 this week, bringing the total for oil and gas up by 11 to 522. Three of the four biggest oil fields expanded this week.
West Texas Intermediate for November delivery rose 26 cents, or 0.5 percent, to $48.09 a barrel at 1:43 p.m. on the New York Mercantile Exchange. Prices are up 8.1 percent this week and down 0.5 percent this quarter.
“The push up in prices close to $50 is triggering a response in the rig count. Not sure if we’re seeing a significant enough increase, but if we continue to add rigs, then production levels would rise, which would have a softening effect on prices,” Gene McGillian, an analyst at TFS Energy Futures, said by phone. “We have a long way to go until then. The rig count still remains at lower levels than before.”
Regional Gains
West Texas’ Permian Basin added 3 rigs for a total of 204 operating in what has been the busiest drilling region during the market slump. The Williston Basin in North Dakota added 2 rigs to total 30, and D-J/Niobrara in Colorado added 1. The Eagle Ford Shale in South Texas remained unchanged, according to the Baker Hughes data.
Oil rigs have continued their climb as members of the Organization of Petroleum Exporting Countries agreed this week to cut production for the first time in eight years in an effort to boost global prices.
If OPEC manages to implement the cut, then it could reinforce the current rebound in drilling, Andrew Cosgrove, an analyst at Bloomberg Intelligence, wrote Sept. 29 in a report. Lower OPEC production would support the case for another 133 rigs being added from now through the end of 2017, he wrote. “Pricing power could come for land drillers in late 2017 or early 2018 if oil remains supported and rig additions continue.”
Oil prices rose this week after OPEC’s informal talks in Algiers, surging the most in more than five months and leading to a second monthly gain. OPEC’s proposal calls for a cut in production to 32.5 million to 33 million barrels a day, but many industry experts are concerned that members won’t be able to cooperate enough to implement the cut.
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