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The U.S. rig count rose 17 rigs this week, but increased drilling doesn’t weaken oil prices

The U.S. land rig count continued to gain for the week ended August 12, 2016, with 17 additional rigs reported in the United States, according to Baker Hughes Industries (ticker: BHI). The total U.S. rig count reached 481 this week, thanks in large part to a continued increase in drilling activity in the Permian.

BHI reported 15 newly active rigs drilling for oil and two new rigs targeting gas, bringing the totals for each to 396 and 83, respectively. Twelve of the additional seventeen rigs reported this week were in the Permian. The next largest gains were in the Granite Wash, Utica and Williston, with one added rig each. Of all the rigs active in the U.S. today, roughly 39% of are located in the Permian Basin, which continues to be an attractive asset for E&P companies even as oil remains below $50 per barrel.

Source: Baker Hughes Industries

Source: Baker Hughes Industries

The increased drilling activity did not negatively affect oil prices today, as many industry-watchers feared. U.S. crude oil benchmark WTI closed $0.20 higher today despite the 4% increase in active rigs. More rigs may not offset declining production from non-OPEC producers, however.

The IEA is projecting significantly lower production from non-OPEC producers as oil prices remain below the $100 levels seen prior to November, 2014. The agency projects a 0.9 MMBOPD decline from non-OPEC sources this year before rebounding by 0.3 MMOBPD in 2017.

Also lending support to oil prices this week, Saudi Arabia’s Energy Minister Khalid al-Falih said the kingdom is ready to take action and support oil markets Thursday. The global oil and gas industries responded positively to the news, but downward pressure could persist as the summer driving season comes to an end with stocks of both crude oil and refined products well above five-year averages.

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