U.S. energy firms added two oil rigs this week, the fifth increase in a row, signaling further pressure on a market awash with crude.
The rise came even as U.S. crude prices have fallen by more than a third from recent highs.
Reflecting plans announced in May and June, when U.S. crude futures averaged $60 a barrel, drillers added 2 oil rigs in the week ended Aug. 21, bringing the total count up to 674, the highest since early May, oil services company Baker Hughes said in its closely followed report.
“Everyone is still looking at it saying ‘Wow, you still don’t have production coming down,'” said Tariq Zahir, founder at Tyche Capital in Laurel Hollow, New York.
Rigs were added in formations including the Williston Basin, where three were brought online and the Granite Wash, where one was added. Two rigs were removed in the Permian Basin, which has seen a pick-up in recent weeks.
U.S. oil prices headed for their eighth consecutive week of declines on Friday, the longest losing streak since 1986, after a sharp drop in China manufacturing increased worries over the health of the world’s biggest energy consumer.
“The question is how long will it continue to rise,” said Phil Flynn, an analyst with the Price Futures Group, referring to the rig count. “With oil prices dropping to around $40, at some point we will see a fallback in rig counts.”
U.S. crude oil futures have fallen by as much as 20 percent in the past month to 6-1/2-year lows. Prices are down by as much as 34 percent from their six-month high of $61.43 in early June.
U.S. crude futures fell 60 percent from over $107 in June 2014 to near $42 in March due to those same oversupply worries and uninspiring demand growth.
In response to that 60 percent price collapse, U.S. drillers eliminated thousands of jobs and idled 60 percent of the record high 1,609 oil rigs that were active in October.
Recommended for you
