U.S. oil and gas producers sent a clear message to investors and oil markets around the world this week, adding, according to Baker Hughes' weekly rig count, a total of 35 new drilling rigs, particularly in Texas' rich Permian Basin.
After a minor contraction last week, Baker Hughes (BHI) reported Friday that domestic oil and gas producers brought 35 rigs online in the past week. Oil producers added 29 rigs, while the gas rig count climbed by six. Including one miscellaneous rig, the overall rig count totals 694.
"OPEC's overextended group hug may just play into the hands of those doing business from the Permian Basin of Texas, and New Mexico," wrote Stephen Guilfoyle, a contributor for TheStreet, on Friday. "This weekly item will become more and more important as 2017 develops."
West Texas' lucrative Permian remains the favorite spot for producers, where 13 rigs were added in the past week. The increase comes after several major players like ExxonMobil(XOM) - Get Report and Noble Energy(NBL) - Get Report acquired acreage in the oil-rich basin this week. Currently, there are 281 rigs online in the basin, far surpassing last year's count of 199.
On Friday, oilfield services giant Schlumberger(SLB) - Get Report called for an estimated 30% increase in North America exploration-and-production investments, led by the Permian, during its latest quarterly results.
The Cana-Woodford basin saw the second largest increase in rigs with nine. No rigs were removed from any major domestic basin. The U.S. offshore rig count did drop by one, however, bringing the count down to 24 rigs.
Crude oil prices eased back slightly but remained in the green. U.S. benchmark West Texas Intermediate for February delivery added 2.2%, trading at around $52.49, while Brent crude futures for March rose 2.1% to $55.33 at 1:15 p.m. ET.
Oil prices rose nearly 3% before the government report on optimism that OPEC and non-OPEC producers are following through on their promised production cuts.
The cartel and some of the non-OPEC producers will be meeting in Vienna this weekend, where it is expected that the world's leading oil producers will have curb production in compliance with the deal reached at the end of November last year. Saudi Arabia's Energy Minister Khalid al-Falih said that 1.5 million of agreed-upon 1.8 million barrels of oil had been removed from the market in January, according to Reuters.
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