July 1, 2016 / 5:05 PM / 3 years ago

U.S. oil drillers add rigs for 4th week in five -Baker Hughes

July 1 (Reuters) - U.S. drillers this week added oil rigs
for a fourth week in five, according to a closely followed
report Friday, in the best month of producers returning to the
well pad since August that signaled a near-two year rout in
drilling may have ended.
    Drillers added 11 oil rigs in the week to July 1, bringing
the total rig count up to 341, compared with 640 a year ago,
energy services firm Baker Hughes Inc said.
    Before this week, drillers added oil rigs in only four out
of 25 weeks this year, cutting on average eight rigs per week
for a total of 206. Last year, they cut 18 rigs per week on
average for a total of 963, the biggest decline since at least
    After slumping from 1,609 since October 2014 amid the
biggest oil rout in a generation, the rig count has started to
inch up as producers boost spending after U.S. crude prices have
hovered since late May around the $50-a-barrel key level that
analysts said would trigger a return to the well pad.
    U.S. crude futures were largely flat this week at
around $48, but have jumped 26 percent over the past three
months, making the second quarter the best in seven years. 
    Looking forward, futures for the balance of the year
 were trading below $50, while calendar 2017 
was under $53.
    "The worst is behind us and a modest recovery in spending is
now underway," analysts at Evercore ISI, a U.S. investment
banking advisory, said in a note this week, predicting North
American producers would boost capital expenditures by at least
25 percent in 2017 and probably another 30 percent in 2018.
    Evercore said its $50 oil price forecast implies the U.S.
oil rig count will recover to about 620 by the end of 2017.
    Simmons & Co, energy specialists at U.S. investment bank
Piper Jaffray, boosted its U.S. oil price forecast to $60 for
2017 and $70 for 2018. That should increase cash flows and allow
producers to spend more on drilling, which should result in more
    With higher prices forecast, Simmons expects total oil and
natural gas rigs will increase to nearly 1,100 by the end of
2018 versus its earlier projection of 850-900 rigs at that time.
    The total oil and gas rig count bottomed at 404 in mid May,
the lowest level since at least 1940, and increased by 10 to 431
in the week ended July 1, according to Baker Hughes data.
    The rig count is one of several indicators of future
production. Other indicators include drillers ability to get
more out of each well and the completion of drilled but
uncompleted wells or DUCs.
    U.S. crude production is expected to fall from 9.4 million
barrels per day in 2015, the highest level since 1972, to 8.6
million bpd in 2016 and 8.2 million bpd in 2017, according to
the latest federal estimates. 

 (Reporting by Scott DiSavino; Editing by Marguerita Choy)
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