U.S. drillers pushed ahead on the biggest surge in oil drilling since 2012 as companies take advantage of oil prices that have held steady above $50 for almost three months.

Rigs targeting crude in the U.S. rose this week by 6 to 597, according to Baker Hughes data reported Friday. Shale drillers have added 72 rigs since 2017 began, the best start in five years. Natural gas rigs rose by 4 to 153, bringing the total for oil and gas up by 10 to 751.

Producers are cashing in on a more stable oil market, with prices swinging between $50 and $55/bbl OPEC and 11 other nations cut back production to help reduce global supplies. Saudi Arabia told OPEC it reduced its oil output by the most in eight years, according to the group’s monthly report released Monday.

“U.S. rig counts should rise further, with the Permian leading major basins,” Bloomberg Intelligence analysts Andrew Cosgrove and William Foiles wrote in a note Monday. While a 30%-40% increase in spending will drive rig gains, they wrote, “these could be weighted to the first half as oil-price volatility surfaces midyear, around the end of the OPEC cut window.”

Oil producers have brought 281 rigs back to work since drilling bottomed out in May, the biggest gain since producers added 361 rigs over the nine months through June 2012.

U.S. crude inventories rose to 518.1 MMbbl last week, the highest in weekly data going back to 1982, according to the Energy Information Administration.

Drilling Boom

Drilling is booming in a few shale plays — led by the Permian Basin in West Texas and New Mexico and the SCOOP/STACK plays in Oklahoma — as they offer good returns at $50/bbl. Producers including Diamondback Energy and Occidental Petroleum remain focused on the Permian, while Marathon Oil intends to double down on its assets in Oklahoma.

Diamondback climbed to a record close Wednesday after beating earnings estimates, while Occidental looks to sell assets in South Texas so it can continue to expand in the Permian. Marathon plans to double its number of rigs in SCOOP/STACK to 10 this year.

The Permian remains the most attractive play for investors this year, according to a Bloomberg Intelligence survey. A land grab in the Midland and Delaware basins within the Permian helped the oilfield reach a new high of $26 billion in merger and acquisition activity last year.

Source: www.worldoil.com