Shale explorers returned to expansion this week, adding the most rigs in a month as the Biden administration called on them for more crude to offset a ban on Russian oil.
The number of rigs drilling for crude in the US rose by eight to 527, the biggest gain since February 11, according to Baker Hughes data released on Friday. Most of the expansion, which followed a weekly drop of three rigs, came in the Permian Basin of West Texas and New Mexico, the world’s busiest shale patch.
President Joe Biden urged US oil companies to increase production as sanctions on Russia have helped to push oil prices above $100 a barrel. The price of West Texas Intermediate crude, which was rallying before the war, is up 66 per cent since early November.
The plea for more production coincides with commitments that major shale explorers made to prioritise financial discipline over growth, however, and many were wary given Mr Biden’s hostility towards fossil fuels and the risk that new drilling will not pay off over the long term.
Drilling activity, which has become more efficient over time by allowing explorers to do more with fewer rigs and less spending, remains more than 20 per cent below pre-coronavirus pandemic highs.
The rig count is a closely watched factor because it is indicative of future crude production. The relationship is imperfect, however, because of the time lag between drilling a well and commencing production. Most of the growth in the rig count over the past year or so has been from the closely held explorers looking to increase output, seeking offers to be bought out.
