U.S. oil drillers put one rig back to work last week, marking the first addition to the rig count since late last year as the industry concentrates on drilling in fields that can turn a profit with prices hovering around $40 a barrel.
Rigs targeting oil in the U.S. rose by one to 387, Baker Hughes Inc. said on its website Friday. Explorers last added oil rigs in the week ending Dec. 18, when 17 were brought online. Natural gas rigs were trimmed by five to 89, bringing the total down by four to 476. The Eagle Ford in south Texas led the gains after three rigs were added for a total oil rig count of 40 in the basin.
“It’s nice to see us basically going flat,” James Williams, president of WTRG Economics in London, Arkansas, said Friday in a phone interview. Since equipment and labor costs have dropped during the downturn, “if you’ve got money, this is a great time to be drilling.”
A handful of areas in Texas, which would be the world’s sixth-largest oil producer if it were a country, are still profitable with crude as low as $30 a barrel, according to an analysis by Bloomberg Intelligence. In DeWitt County, which produced more than 100,000 barrels a day in November from the Eagle Ford formation, the average well can be profitable with U.S. benchmark crude at $22.52 a barrel.
“It may be harder to kill” U.S. producers than originally thought, Bloomberg Intelligence analyst William Foiles said last month in a report. The wide range of prices where different producers can be profitable in different places “undermines efforts to come up with a single threshold for U.S. shale producers.”
Crude prices have rallied since a mid-February proposal by Saudi Arabia, Russia, Venezuela and Qatar to cap oil output in an effort to reduce oversupplies that pushed prices to a 12-year low of $26.21 a barrel. West Texas Intermediate, the U.S. benchmark, fell 0.5 percent to $39.99 a barrel at 2:06 p.m. on the New York Mercantile Exchange.
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The summit in April would seek commitments from a wider range of producers both within and outside the Organization of Petroleum Exporting Countries. Just the idea of the proposal “put a floor under oil prices,” Qatari Oil Minister Mohammad Al Sada said in an e-mailed statement this week. “To date, around 15 OPEC and non-OPEC producers, accounting for about 73 percent of global oil output, are supporting this initiative.”
America’s oil drillers have been idling rigs since October 2014 as the world’s largest crude suppliers battle for market share. Despite the cutbacks, U.S. production has remained stubbornly high as new techniques that increase efficiency keep the oil flowing.
Production fell by 10,000 barrels a day to 9.07 million last week. It was the seventh time in the past eight weeks that U.S. output dropped.
(Updates with oil prices in last paragraph.)
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