Onshore drilling continues to spool up as oil remains near $50 per barrel

The U.S. rig count continued to climb in the week ended March 31, 2017, with Baker Hughes reporting 15 additional rigs added to fleets across the country bringing the total to 824. Oil prices continued to hold above $50 per barrel despite the increased rig activity which has created downward pressure on oil prices as more production in the U.S. offsets cuts from OPEC.

Baker Hughes rig count for the week ended March 31, 2017

Eleven of the fifteen additional rigs this week were onshore, but there were also four added offshore rigs. Ten of the added rigs were targeting oil, while the remaining five drilled for natural gas. The number of rigs drilling for oil was 662, while those drilling for gas reached 160. Those totals are 300 and 72 rigs higher than year-ago levels, respectively.

The majority of the increase was in the Permian this week. The play continues to be by far the most active region in the country with four additional rigs this week bringing the total number in the basin to 319, 4.4x as many rigs as the next most active basin, the Eagle Ford.

Oil prices have remained reliant in the face of increasing rig activity this week as many prepare for OPEC to extend production cuts, but long-term impacts of increasing shale production could mean a supply shortfall down the road. Without investment in long-lead time projects, demand could outstrip production and leave the industry behind the curve on bringing new production to market.

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