(Reuters) - U.S. drillers added oil rigs for a tenth week in a row, doubling the rig count in a ten-month recovery as energy companies boost spending on new production to take advantage of a recovery in crude prices.
Drillers added 21 oil rigs in the week to March 24, the biggest weekly increase since the week to Jan. 20, bringing the total count up to 652, up from a six-year low of 316 in May, energy services firm Baker Hughes Inc said on Friday.
During the same week a year ago, there were 372 active oil rigs.
That rig count increase came despite a collapse in U.S. crude futures over the past two weeks down to levels seen when the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut production on Nov. 30.
U.S. crude futures steadied around $48 a barrel on Friday as rising domestic production and inventories offset hopes OPEC output cuts were beginning to balance the global glut. [O/R]
U.S. crude inventories have been growing since the start of the year and hit a fresh record high last week as steadily rising production climbed to over 9.1 million barrels per day.
Production was projected to rise from an average of 8.9 million bpd in 2016 to 9.2 million bpd in 2017 and a record high of 9.6 million bpd in 2018, according to federal energy data. [EIA/S]
Even though U.S. shale producers were drilling at the highest rate in 18 months, they have left a record number of wells unfinished in the Permian basin, the largest oilfield in the country, a sign that output may not rise as swiftly as drilling activity would indicate.
Since crude prices first topped $50 a barrel in May after recovering from 13-year lows in February 2016, drillers have added a total of 336 oil rigs in 39 of the past 43 weeks, the biggest recovery in rigs since a global oil glut crushed the market over two years starting in mid 2014.
Baker Hughes oil rig count plunged from a record 1,609 in October 2014 to 316 in May 2016 as U.S. crude collapsed from over $107 in June 2014 to near $26 in February 2016.
Analysts projected U.S. energy firms would boost spending on drilling and pump more oil and natural gas from shale fields in coming years with energy prices expected to climb higher.
Futures for the balance of 2017 were trading about $49 a barrel, while calendar 2018 was fetching around $50 a barrel.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the total oil and gas rig count would average 831 in 2017, 953 in 2018 and 1,064 in 2019. Most wells produce both oil and gas.
That compares with an average of 736 so far in 2017, 509 in 2016 and 978 in 2015, according to Baker Hughes data.
Analysts at U.S. financial services firm Cowen & Co said in a note this week that its capital expenditure tracking showed 57 exploration and production (E&P) companies planned to increase spending by an average of 50 percent in 2017 over 2016.
That expected spending increase in 2017 followed an estimated 48 percent decline in 2016 and a 34 percent decline in 2015, Cowen said according to the 64 E&P companies it tracks.
Reporting by Scott DiSavino; Editing by Marguerita Choy