US Oil Rig Count Jumps by 12, Crude Price Ignores the Increase

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In the week ended January 26, 2018, the number of land rigs drilling for oil in the United States totaled 759, up by 12 compared to the previous week and 193 higher when compared with a total of 566 a year ago. Including 188 other land rigs drilling for natural gas, there are a total of 947 working rigs in the country, up by 11 week over week and 235 year over year. The data come from the latest Baker Hughes North American Rotary Rig Count released on Friday.

West Texas Intermediate (WTI) crude oil for March delivery settled at $65.51 a barrel on Thursday and traded up about 1% Friday afternoon at $66.18 shortly before regular trading closed.

The natural gas rig count decreased by one to 188 this week. The count for natural gas rigs is now up by 43 year over year. Natural gas for March delivery traded up about 2.5% at around $3.18 per million BTUs before the count was released and fell a penny following the report’s release.

Increased drilling for oil is following the ever-rising price. Crude is up nearly 10% since the beginning of the year, and that is causing some headaches among producers that hedged a large portion of their 2018 production when prices rose to around $55 a barrel late last year.

More than just leaving cash on the table, demand for oilfield services is pushing those costs higher as well. That means that making a profit on a barrel hedged between $50 and $55 is at best a close-run proposition.

Among the states, Baker Hughes reported that Texas added 13 rigs, West Virginia added four and New Mexico added three. Oklahoma lost four rigs, Louisiana had three fewer, and Ohio and Utah each lost one.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 427, 18 more compared with the previous week’s count. The Eagle Ford Basin in south Texas has 66 rigs in operation, one fewer week over week, and the Williston Basin (Bakken) in North Dakota and Montana now has 45 working rigs, unchanged for the week.

Producers added six horizontal rigs last week to raise the count to 808, while offshore drillers shut down two rigs to bring the offshore count to 17 working rigs.