The combined oil and gas rig count, an early indicator of future output, rose two to 432 in the week to April 9, its highest since April 2020, Baker Hughes said in its closely followed weekly report.
That puts the rig count up 77% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940. The total count, however, is still 170 rigs, or 28%, below this time last year.
U.S. oil rigs were steady at 337 this week, their highest since late April 2020, while gas rigs rose two to 93, their highest since early April 2020. It will take a long time for the rig count to rise above levels seen before April 2020 when drillers slashed 263 rigs from active duty as coronavirus travel restrictions caused demand and prices to crash.
More than half of U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico where total units held steady at 224 this week, their highest since late April.
Analysts at Goldman Sachs forecast the total U.S. rig count would rise to an average of 480-500 rigs by the fourth quarter of 2021 with most of that increase coming from the Permian (35-45 rigs), Eagle Ford in Texas (5-10 rigs) and Bakken in North Dakota (3-5 rigs).
“We believe that the U.S. needs a total of about 500 active rigs to keep production flat,” Goldman Sachs said.
Energy research firm East Daley lifted its rig and production outlook for the Permian following a 22% rally in U.S. West Texas Intermediate (WTI) futures during the first quarter.
“We project Permian drilling to grow by 70+ rigs by early 2022 to over 285 basin rigs, setting the stage for a new multi-year growth cycle in Permian oil and gas production if oil prices can hold recent gains,” East Daley said.
WTI prices, which have gained in four of the past five months, were down this week on worries about rising global production and weaker demand than before the coronavirus pandemic. [O/R]
After falling to a record low of 433 rigs on average in 2020, according to Baker Hughes data going back to 1988, U.S. investment bank Piper Sandler’s energy specialist Simmons Energy forecast the count would rise to 451 in 2021 and 558 in 2022.
That is the same as Simmons forecast since late March.
Baker Hughes said the annual average rig count peaked at 1,919 in 2012.