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Rise In Rig Count Threatens To Undermine Recent Oil Price Spike

By Julianne Geiger - May 19, 2017, 12:18 PM CDT

The number of active oil and gas rigs in the United States rose for the eighteenth straight week, Baker Hughes reported on Friday-this time by 16.

The number of oil rigs in operation increased by 8, and gas rigs increased by the same number. Combined, the total oil and gas rig count in the US now stands at 901 rigs, or 497 above the count a year ago. The last time oil and gas rigs in the US exceed 900 was May 1, 2015.

At 12:27pm EST, WTI was trading up 2.21% for the day at $50.44-having crossed the ever-important $50-per-barrel mark. Brent Crude traded up 2.19% at that time, at $53.66. Both benchmarks had picked up almost $3.00 per barrel from last Friday after the Energy Information Administration (EIA) reported earlier in the week a decrease in both crude oil and gasoline inventories, and after reports that OPEC may consider not only extending production cuts into 2018, but that it may consider deepening them as well. With the extension into 2018 likely already priced into each oil barrel, a deepening of the production cut-or rumors of deepening the production cut-was the only tool OPEC had left in its arsenal to combat the effects of U.S. shale to lift prices, even if only temporary.

The last four months or more have been particularly difficult for OPEC, as production cuts and talks of extensions and deeper cuts seem to be met at every turn by U.S. shale, backed by its most capable challenger-the Permian Basin. Related: Oil Prices Rise As Most OPEC Members Back Deal Extension

This week, the heavyweight known as the Permian, added 4 rigs, but the Mississippian also put 3 into play, followed by the Marcellus with 2 rigs. DJ-Niobrara, Granite Wash both lost rigs.

Both benchmarks started to slip within minutes after data release-proving that OPEC's clout isn't what it used to be, with WTI trading at $50.37 and Brent at $53.62%.

By Julianne Geiger for Oilprice.com

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Julianne Geiger

Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More

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Comments

  • Mark - 19th May 2017 at 12:37pm:
    I can never understand why oil companies would do this, bring on more rigs when they know there is a glut, and their actions will only contribute to the price of oil falling. Isn't that like shooting yourself in the foot? Is it necessary to be so greedy that you end up cheating yourself in the process?
  • Thomas - 19th May 2017 at 1:38pm:
    This is the second time in a week I find myself questioning the motives on some of the journalists on this website. Yes the rig count has gone up by 16. Are you really suggesting this has added hundreds of thousand barrels/day to US production? It seems we have had to suffer 2.5 years of Arabs and Persians lying about the amount of oil they can produce until now, suddenly it has become obvious they are all screwed as they do not have enough liquid cash to produce the infrastructure required to produce their fictional volumes. But now it is the turn of American bullshitters to claim they can produce extra millions of barrels with the addition of a mere handful of drilling rigs but their technology is so innovative they can do this in their sleep. Once again I must ask, are you truly a journalist or have you printed this story to help a financial speculator friend?