US rig count holds at 7-month high on oil increase: Baker Hughes

Quantum Commodity Intelligence – North American drilling activity increased by three rigs last week to maintain the total count at seven-month highs, according to the latest report from oilfield services firm Baker Hughes.

The total rig count increased to 629 the week ending 1 March, although still 120 rigs below the same stage last year, or a 16% drop, as profitable oil prices offset the continued weakness in US natural gas values.

Rigs drilling for oil accounted for the gains, increasing by three to 506 units, but 86 fewer than at the same stage last year. Rigs drilling exclusively for gas were down one at 119, a figure 35 fewer than year-ago levels.

But Texas, the largest producing state, lost two rigs to stand at 299, breaking a four-week winning streak, with the gains coming from smaller-producing states.

The Permian Basin, spanning West Texas and New Mexico, was up one rig at 315, while the Haynesville gas play was down two rigs on the week at 41, down from 67 a year ago.

Prices

US oil prices rebounded last week on expectations that OPEC+ would announce a continuation of cuts, which was confirmed over the weekend. NYMEX WTI trading on the Chicago Mercantile Exchange settled on Friday at $79.92/b for the Apr24 contract, up 4.3% on the week.

Front-month May24 ICE Brent futures closed at $83.61/b, up 3.75% over the same timeframe.

Natural gas continued to struggle, sitting just above multi-year lows, with the Apr24 Henry Hub contract on NYMEX closing the week 1% higher at $1.84/mmBtu. 

"The continued volatility in the gas prices appears to weigh on gas rigs with some of the exploration companies reducing investments for natural gas production," said Warren Patterson, head of ING's commodity research.

Meanwhile, crude oil production estimates were unchanged at a record 13.3 million bpd, according to the latest EIA report, while gas liquid output was also steady at around 6.4 million bpd.