According to Baker Hughes Inc. (NASDAQ:BHI), energy firms have increased the oil rig count to two this week to 672 for the fourth straight week. Total US rigs have declined to 1,029 from last year, gas rigs down 110, oil rigs down 917 and other rigs by two, but the pace of the decline has slowed.
Oil drillers are likely to be disappointed with the move as U.S crude price has dropped by $20 a barrel to reach $42 a barrel, a 6-1/2-year low. Several forecasters, including Australia bank Macquarie predict the decline in rig count through the second half of the year due to weaker prices. Though the number of rigs is 58 percent lower than last October, the meager increase last month indicates a higher oil production. However, the effect is expected to take time as it can take up to six months to begin pumping crude.
“Both the spot price and hedging opportunity are long gone now though, which makes us question the longevity of rig additions,” said analysts at CIBC bank.
U.S crude oil prices are facing a drop in crude prices for the seventh straight week, the longest since January. The drop in prices was caused by oversupply from U.S and OPEC producers and less demand from China and the rest of the world. In the year 2014, oil priced dropped around $107 a barrel to under $44 in January. This led to slashed spending and thousands of jobs were cut around 1,609 rigs that were active in October.
Last week, U.S crude oil production dipped to 9.4 million barrels per day from 9.4 million barrels per day, according to government data. The government said that it expects U.S production to continue to decline through mid-2016 and would resume growing. Oil prices rose slightly on Thursday’s six-year lows as West Texas Immediate futures gained about 27 cents to close at $42.50 per barrel on New York Mercantile Exchange.