US rig count rebounds as oil drilling leads gains: Baker Hughes

Quantum Commodity Intelligence – North American oil and gas producers added the most rigs in over six months as drilling activity increased, having previously flatlined so far this year, according to the latest oilfield services firm Baker Hughes report.

The total rig count increased by seven units to 629 the week ending 15 March to reverse the previous week's losses, although it was still 125 rigs below the same stage last year. However, this was the biggest single weekly increase since September, having ended last year at 622.

Rigs drilling for oil increased by six, standing at to 510 units, 79 fewer than at the same stage last year. Rigs drilling exclusively for gas were up one at 116, a figure 46 fewer than year-ago levels.

Texas, the largest-producing state, added three rigs to stand at 294, while the biggest gain came in Louisiana, which added five units. Pennsylvania lost the most rigs, dropping by two units.

The Permian Basin, spanning West Texas and New Mexico, added three units to stand at 316, while the Eagle Ford play added three rigs on the week to stand at 55.

In the latest deal among US drillers, APA Corp. (formerly Apache) has agreed to acquire Permian Basin operator Callon Petroleum Co. for $2.6 billion, as APA remains upbeat on prospects for the giant Permian play.

Prices

US oil prices rebounded last week on a run of positive data economy, with NYMEX WTI trading on the Chicago Mercantile Exchange closing Friday at $81.04/b for the Apr24 contract, up 3.9% on the week.

Front-month May24 ICE Brent futures settled at $85.34/b, down 4% over the same timeframe.

However, natural gas remained under strong downward pressure despite a second major producer announcing output cuts, with the Apr24 Henry Hub contract on NYMEX closing the week 8.5% lower at $1.655/mmBtu, while May24 eased below $1.80/mmBtu.

Last week, the US Energy Information Administration (EIA) said it expects US natural gas prices to remain close to historically low levels in the short term, having registered an all-time low last month when adjusted for inflation.

The government agency said benchmark Henry Hub futures prices will remain below the psychologically important $2/mmBtu level during the second quarter, having averaged just $1.72/mmBtu in February.

"We expect the Henry Hub spot price to remain below $2/mmBtu in Q2 2024 as the winter heating season ends with natural gas inventories 37% above the five-year average," said the EIA in its monthly Short Term Energy Outlook (STEO).

The agency added that low prices were partially driven by reduced natural gas consumption in the residential and commercial sectors over winter.