U.S. oil drillers add rigs even as prices dive anew - Baker Hughes

By Scott DiSavino
Aug 14 (Reuters) - U.S. energy firms added oil rigs for a
fourth straight week, according to data that highlights how a
period of stable prices earlier this summer lulled some drillers
into stepping up spending just before a second oil market slump.
Reflecting plans announced in May and June, when U.S. crude
futures CLc1 averaged $60 a barrel, drillers added two oil
rigs in the week ended Aug. 14, bringing the total rig count up
to 672, the highest since early May, oil services company Baker
Hughes Inc BHI.N said in its closely followed report.
They may now regret those moves as U.S. crude has tumbled
nearly $20 a barrel to reach a new 6-1/2-year low under $42 a
barrel, prompting a new round of spending and job cuts across
the beleaguered global oil industry.
Many forecasters including Australian bank Macquarie expect
the rig count to resume drifting lower through the second half
of the year as weaker prices bite.
While the number of rigs is still 58 percent lower than it
was at its peak last October, the slight rebound over the past
month suggests U.S. oil production may be slightly higher than
earlier expected, although the effect will take time to see. It
can take up to six months for a new well to begin pumping crude.
"Recent rig additions were most likely based on decisions
taken when (U.S. crude prices) rallied in May-June, and more
importantly when Calendar 2016 and 2017 pricing allowed for
hedging at $65 a barrel," analysts at CIBC, a bank, said in a
note this week, noting a number of producers have indicated that
$65 is level where they would consider adding rigs.
"Both the spot price and hedging opportunity are long gone
now though which makes us question the longevity of rig
additions," CIBC said.
U.S. crude oil prices were on track for a seventh straight
weekly loss, the longest losing steak since January, on
continued oversupply worries from mostly U.S. and OPEC producers
and slumping demand from China and much of the rest of the
world. O/R
The last time oil prices collapsed, from around $107 a
barrel in June 2014 to under $44 in January, energy firms
slashed spending, cut thousands of jobs and idled around 60
percent of the record high 1,609 oil rigs that were active in
October.
Production has started to show signs of decline. U.S. crude
output dipped to 9.4 million barrels per day last week from 9.5
million bpd in the prior week, according to government data.
That is down from average production from mid May to late June
of 9.6 million bpd, the most since the early 1970s.