Drillers boost U.S. oil rigs for first time in 30 weeks

LYNN DOAN

HOUSTON (Bloomberg) -- Drillers put rigs in U.S. oil fields back to work for the first time since December, driving down crude futures on speculation that an unprecedented retreat from the country’s prolific shale formations is ending.

Rigs targeting oil in the U.S. rose by 12 to 640, the first increase since Dec. 5, Baker Hughes Inc. said on its website Friday. The count in almost every major U.S. oil basin gained, with Texas’s Eagle Ford shale formation adding three.

America’s oil drillers have sidelined more than half the country’s rigs since October as the world’s largest suppliers battle for market share. The crude being pumped out of U.S. shale formations has helped create a global glut that drove prices down 49% in the second half of 2014. Traders have been watching the rig counts as they try to determine when U.S. oil production will fall.

“This is fairly solid evidence that the decline in the oil rig count has come to an end, as long as oil prices hold up,” James Williams, president of energy consultancy WTRG Economics, said by phone on Thursday. “If anything, this is going to bring the market down a little bit. It indicates that any production decline may only last for three months.”

Despite the collapse in drilling, the U.S. pumped 9.7 MMbopd in April, the most in monthly Energy Information Administration data since 1971. Output slipped in both North Dakota, where the prolific Bakken shale formation lies, and Texas, home to both the Eagle Ford shale and Permian basin.

Gains Pared

Higher oil prices and a decline in drilling completion costs may spur enough new production to come online to stave off a drop in total supply, Bloomberg Intelligence energy analysts Vincent Piazza and Syarifa Galeb said in a research note Wednesday.

U.S. benchmark West Texas Intermediate oil for August delivery pared gains after the rig report. WTI rose 32 cents to $57.28/bbl at 1:30 p.m. East Coast time on the New York Mercantile Exchange, down from $57.47 at 1 p.m. The price is up 7.5% this year and down 45% from a year earlier.

Oil explorers began their retreat from U.S. fields late last year as the Organization of Petroleum Exporting Countries, which accounts for more than a third of the world’s oil, resisted calls to curb its own supply. The 12-nation group accelerated its crude production last month to the highest level since August 2012, a Bloomberg survey shows.

“OPEC production is seen to have increased further in June,” JBC Energy GmbH, a Vienna-based consultant, said in a research note on Wednesday. “With these strong growth rates, OPEC supply growth is now challenging non-OPEC supply growth.”