After an astounding 35 rigs were brought online last week, U.S. oil and gas producers are not holding back, bringing another 18 online this week.
Domestic oil producers added 14 oil rigs, while the gas rig count climbed by three, according to oilfield services giant Baker Hughes BHI. Including one miscellaneous rig, the overall rig count now totals 712, surpassing last year's rig count of 619.
Not surprisingly, the prolific west Texas Permian Basin saw the biggest increase in rigs with ten added this week. The Eagle Ford Basin bought five online, marking the second largest build.
This is in line with commentary by Baker Hughes management earlier this week as they see North America onshore revenue increasing for the first half of 2017 as "customers ramp up activity, with service pricing improving but limited by overcapacity."
Several basins, however, took rigs offline, including DJ-Niobrara, Fayetteville and Marcellus. The offshore rig count also declined by three this week.
Following the report, U.S. benchmark West Texas Intermediate crude for March delivery fell 1.8% to $52.81, while Brent crude futures dropped about 2%, trading at around $55.09 at 1 p.m. ET.
"[Wednesday] was a prime example of domestic inventory numbers just not impacting market prices as much as the idea that OPEC and the participating non-OPEC producers have largely kept to their agreed upon production cuts," wrote TheStreet contributor Stephen Guilfoyle. "Due to this market resiliency, I don't know how much [the Baker Hughes] print can move WTI prices beyond the knee-jerk."
Before the rig count, oil prices were down nearly 2% on supply concerns. Traders had expected to see more rigs come online in the U.S., further signaling an increase in production after inventories rose this week, while OPEC and non-OPEC oil producers appear to be standing by their commitment to reduce output.
Energy stocks were lagging during the trading session and remained lower after the report. Oil majors such as ExxonMobil (XOM) - Get Report and ConocoPhillips (COP) - Get Report were both in the red. The Energy Select Sector SPDR ETF (XLE) - Get Report was down 1.3%, mainly due to fellow U.S. supermajor Chevron (CVX) - Get Reportmissing top-line estimates for the fiscal fourth quarter.
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