Rigs targeting oil and natural gas in the U.S. increased this week, tying a 20-month high, as energy producers used a record number of horizontally drilling ones to reach deposits in shale formations in the middle of the country.
The oil and gas rig counts grew by three each, bringing the total to 1,861 and matching the high set on April 25, data posted on Baker Hughes’ website show. Rigs drilling horizontally to bore across formations gained five to reach a record 1,248, the Houston-based field services company said.
Energy producers are using more efficient drilling techniques to draw record volumes of oil and gas from U.S. shale formations, boosting domestic crude output to the highest level in a quarter-century and bringing the nation closer to energy independence than it has been in 28 years. Horizontal rigs in tight-oil plays surged in the first quarter, particularly in the Permian Basin of West Texas and southeastern New Mexico, as companies raced to reach the trapped crude.
“Drillers are wanting to take advantage of the high gas prices and oil prices while they can with horizontal rigs because you can get particularly high production out of wells with those initially,” James Williams, president of energy consulting firm WTRG Economics in London, Arkansas, said by telephone today. “That’s a really big advantage if you’re uncertain about the outlook for prices in the long-term.”
West Texas Intermediate crude for June delivery rose 52 cents, or 0.5 percent, to settle at $102.02 a barrel on the New York Mercantile Exchange, up 7.2 percent in the past year.
U.S. oil output jumped 78,000 barrels a day in the week ended May 9 to 8.43 million, the highest level since 1986, data compiled by the Energy Information Administration, the Energy Department’s statistical arm, show. Oil supplies climbed 947,000 barrels to 398.5 million, according to the EIA.
Spending in the Permian Basin will probably rise by 25 percent this year, with other basins including North Dakota’s Bakken play and the Marcellus in the eastern U.S. seeing similar gains in activity, Scott Gruber, senior analyst at Sanford C. Bernstein & Co. in New York, said in an e-mailed research note May 13.
“The unfolding up-cycle in North America is no longer in doubt,” he said in the report. “However the strength of the up-cycle is still in question.”
North American oil-services stocks have hit “peak optimism” as companies focus their spending on production growth rather than responding to commodity prices, Gruber said.
Horizontal rigs targeting crude in Texas’s Eagle Ford play jumped by four to 191, the highest since at least February 2011, according to Baker Hughes data. Horizontal gas rigs rose the most in the Utica Basin of the eastern U.S., where the count gained three to 19.
U.S. gas stockpiles rose 105 billion cubic feet last week to 1.16 trillion, EIA data show. Supplies were 45.3 percent below the five-year average and 40.5 percent under year-earlier inventories.
Natural gas for June delivery slid 5.6 cents, or 1.3 percent, to settle at $4.413 per million British thermal units on the Nymex. Prices have risen 12 percent in the past year.
Rigs on land jumped by nine this week to 1,791. Rigs in inland waters fell by one to 13. The offshore rig count, primarily in the Gulf, dropped two to 57.
Miscellaneous rigs, which usually drill for geothermal energy, were unchanged at four.
Energy rigs in Canada gained eight to 153, following a seasonal drilling pattern.