July 1, 2016 / 5:57 PM / 2 years ago

UPDATE 1-U.S. oil drillers add rigs for 4th week in five -Baker Hughes

(Adds benchmarks, basin and offshore details, total average
cuts in the first half of 2016)
    July 1 (Reuters) - U.S. drillers this week added oil rigs
for a fourth week in five, according to a closely followed
report Friday, in the best month of producers returning to the
well pad since August that signaled a near-two year rout in
drilling may have ended.
    Drillers added 11 oil rigs in the week to July 1, the
biggest weekly increase since December, bringing the total rig
count up to 341, compared with 640 a year ago, energy services
firm Baker Hughes Inc said. RIG-OL-USA-BHI
    In the Permian basin in West Texas, the number of rigs rose
by four for a third week in a row to a four-month high of 154.
    In the first half of the year, drillers cut on average eight
rigs per week for a total of 195, compared with last year's cuts
of 18 rigs per week on average for a total of 963, the biggest
decline since at least 1988.
    After slumping from 1,609 since October 2014 amid the
biggest oil rout in a generation, the rig count has started to
inch up as producers boost spending after U.S. crude prices
since late May have hovered around the $50-a-barrel key level
that analysts said would trigger a return to the well pad.
    U.S. crude futures were largely flat this week at
around $48, but have jumped 26 percent over the past three
months, making the second quarter the best in seven years. 
    Looking forward, futures for the balance of the year
 were trading below $50, while calendar 2017 
was under $53.
    "The worst is behind us and a modest recovery in spending is
now underway," analysts at Evercore ISI, a U.S. investment
banking advisory, said in a note this week, predicting North
American producers would boost capital expenditures by at least
25 percent in 2017 and probably another 30 percent in 2018.
    Evercore said its $50 oil price forecast implies the U.S.
oil rig count will recover to about 620 by the end of 2017.
    Simmons & Co, energy specialists at U.S. investment bank
Piper Jaffray, boosted its U.S. oil price forecast to $60 for
2017 and $70 for 2018. That should increase cash flows and allow
producers to spend more on drilling, which should result in more
    With higher prices forecast, Simmons expects total oil and
natural gas rigs will increase to nearly 1,100 by the end of
2018 versus its earlier projection of 850-900 rigs at that time.
    The total oil and gas rig count bottomed at 404 in mid May,
the lowest level since at least 1940, and increased by 10 to 431
in the week ended July 1, according to Baker Hughes data.
    Separately, the number of U.S. offshore rigs fell by two to
19, the lowest level since 2010, due to the loss of two rigs in
Louisiana this week. There are 18 offshore rigs operating in
Louisiana and one in Alaska.

 (Reporting by Scott DiSavino; Editing by Marguerita Choy)
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