Oil explorers put drilling rigs back to work in US fields for only the second time this year, as supply and demand come closer into balance.
Rigs targeting crude in the US rose by 9 to 325 this week, Baker Hughes Inc. said. Explorers have idled more than 1,000 oil rigs since the start of last year.
Natural gas rigs were trimmed by 5 to 82 this week, bringing the total for oil and gas up by 4 to 408, Bloomberg reported.
Oil prices extended declines immediately after the release of the Baker Hughes report. Futures in New York have climbed about 85% from the lowest level since 2003 earlier this year on signs the global glut is easing.
“The uptick for rigs might have prompted some people to think that there’s a supply side reaction to $50 oil,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “This is just one week’s data. This doesn’t change the fact that the rig count is down a great deal or represent the beginning of a recovery.”
The worst downturn in decades led oil producers to scrap projects and cut spending on drilling, signaling that supply and demand are getting close to being in balance. Disruptions in Canada and Nigeria took 50 million barrels out of the market last month, Geneva-based trading house Mercuria Energy Group Ltd. estimated.
“The rebalancing is happening a bit faster than anticipated because of the disruptions,” Mercuria Chief Executive Officer Marco Dunand said in an interview. “Demand is also stronger than expected” in countries from India to the US, he said.
The International Energy Agency forecasts oil demand will increase this year by 1.2 million barrels a day, while Dunand said growth is likely to top 1.5 million, perhaps rising as high as 1.8 million.
America’s oil drillers have been idling rigs since October 2014 as the world’s largest crude suppliers battle for market share. Despite the cutbacks, US production has only recently begun to falter, as new techniques that increase efficiency keep the oil flowing.
US output declined for a 12th week and crude stockpiles dropped in the week ended May 27, according to a report from the Energy Information Administration.
