U.S. energy companies increased the number of oil rigs they operated this year for the first time this week, but the number of rigs dropped the most in January since April 2016. With the Permian boom in the largest shale oil formation in the United States, oil production has cooled down.
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Energy services company Baker Hughes said in a report released on Friday that in the week ending January 25, energy companies added 10 oil rigs, bringing the total number to 862.
More than half of the oil rigs in the United States are located in the Permian basin, the country’s largest shale oil formation. The number of existing rigs in the region increased by three to 484 this week, far below the 493 that reached their four-year high in November last year.
Energy companies cut 23 oil rigs this month, the largest number of cuts since April 2016. Over the past two months, they added 12 in November and cut two oil rigs in December.
The number of oil rigs in the U.S. is an early indicator of future production, and this year is higher than a year ago (759 rigs were active last year), because energy companies are investing more money to get higher prices.
However, in 2019, energy companies said they planned to cut drilling rigs, partly because crude oil prices were expected to be lower than last year.
According to the U.S. Energy Information Agency (EIA) forecast this week, oil production in seven major shale formations in the United States is expected to rise to a record 8.2 million barrels a day in February. But EIA expects the Permian production growth in February to be the smallest month since May 2018, when production declined slightly.
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In recent months, because of the sharp drop in oil prices, oil production has surged, exceeding pipeline transportation capacity, which has made the oil reserves in the region in trouble, and the Permian oil production has been under pressure.
According to John Kemp, a Reuters columnist, the U.S. shale boom will cool down this year, and a fall in prices later last year (which usually takes three to four months to affect drilling) is likely to slow production growth in the second half of 2019.
According to Baker Hughes, there are 1059 active oil and gas rigs in the United States this week. Most rigs produce oil and gas at the same time.
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