U.S. drillers added oil rigs for the 19th month in a row but at the slowest pace since 2020 even though the government urged producers to boost output as the world seeks alternatives to Russian energy after Moscow’s invasion of Ukraine.
The oil rig count, an early indicator of future output, rose seven to 531 in the week to March 25, its highest since April 2020. It increased by nine in March, its lowest monthly gain since September 2020, according to energy services firm Baker Hughes Co’s closely-watched report on Friday.
U.S. Energy Secretary Jennifer Granholm said on Tuesday the Biden administration believes producers will boost U.S. oil supply by the end of the year, after she urged them to raise output quickly in the wake of the Russian invasion on Feb. 24.
As the number of gas rigs remained unchanged at 137, the combined oil and gas rig count, also rose seven to 670 this week, its highest since March 2020, Baker Hughes said.
The total count was up 253 rigs, or 61%, over this time last year.
For the month, the total oil and gas rig count rose by 20 in a record 20th monthly increase, while for the quarter, it rose 84, its sixth quarterly hike in a row.
For the quarter, the oil rig count it rose by 51, its sixth quarterly hike in a row, but was down from a 59 rig increase in the fourth quarter.
“Some firms are doing what they can to increase production while others are still more interested in returning money to shareholders,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
Even though the oil rig count has climbed, the increases have been small and slowed down recently because many companies focus on returning money to investors rather than boosting output and are facing supply constraints.
“Physical limitations in the field, including a very tight market for labor across the value chain (from trucking to crews), along with a tight market for supplies (particularly casing), are also putting a ceiling on the pace of activity growth,” analysts at Mizuho, a bank, said in a note.
U.S. crude production was on track to rise from 11.2 million barrels per day (bpd) in 2021 to 12.0 million bpd in 2022 and 13.0 million bpd in 2023, according to federal energy data. That compares with a record 12.3 million bpd in 2019.
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