New York — The combined US oil and natural gas rig count climbed for a third straight week, up five to 1,179, during the week that ended Wednesday, S&P Global Platts Analytics data showed Thursday.
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The increase, which moves the nationwide count to the highest level since March 2015, comes despite sliding crude prices and a steep contango structure in the forward curve. Total oil and gas rigs last week were 131 above year-ago levels.
An increase in the number of Permian rigs, up four to 481, contributed to total US oil rigs edging up to 940, a five-week high. Rig counts the SCOOP-STACK play rose by one to 111, but this growth was balanced by a three-rig decline in the Eagle Ford to 94, holding week-on-week US oil rig growth to only one.
The balance of the nationwide increase was from an uptick in rigs chasing gas, which moved up three to 218. Operators in the gas-focused Marcellus play rose one rig for a total of 53 and the Utica play rig count was steady at 16. Haynesville rigs, on the other hand, fell to 57, a week-on-week decline of one.
The number of rigs chasing both oil and gas was unchanged at 18.
US oil drilling activity has continued to grow despite a more than 19% decline in the price of prompt NYMEX WTI futures, since it hit a four-year high in early October. US oil rigs are dipped two from the first week of October, but have markedly recovered from a mid-October dip that brought counts as low as 920.
Despite recent declines, WTI prices averaged 8% higher during the reporting week compared with the same week a year ago and the oil rig count has jumped by 123 over the same period.
Increased drilling activity has taken US production to record highs in 2018. This week, the US Energy Information Administration revised higher its US production forecasts to 10.9 million b/d in 2018 and 12.06 million b/d for 2019. US production rose to a fresh all-time high of 11.6 million b/d during the week that ended Friday, EIA data showed.
US inventory builds, especially at the delivery point of the NYMEX crude contract in Cushing, Oklahoma, has pushed the forward curve into contango. Prompt-month NYMEX WTI futures have been trading at a discount to second-month levels since mid-October, but this week the one-year spread has collapsed.
Prompt-month WTI was trading at around a $2.32 discount compared with 12-month levels Thursday. The prompt-month/12-month WTI spread settled at a 22-cent backwardation as recently as October 26. Backwardation was as wide as $1.90/b this time a month ago. -- Chris van Moessner, firstname.lastname@example.org
-- Edited by Valarie Jackson, email@example.com