Well that didn’t take long. U.S. shale producers have wasted no time capitalizing on the recent bump in oil prices, spurred by OPEC’s tentative agreement to cut oil production at its semiannual meeting next month. The cartel has enjoyed seeing prices climb above $50 per barrel for the first time this year as a result of expectations for a coming reduction in the global oversupply, but so too have American producers. As Reuters reports, the number of American rigs in operation has continued a steady four-month increase thanks to this bump in prices:
The number of rigs drilling for oil in the United States rose again this week, extending one of its best recoveries with no cuts for 16 straight weeks, with analysts expecting more additions as crude prices hold over $50 a barrel…That 16-week streak of not cutting rigs was the third longest since 1987, following 19 weeks in 2011 and 17 weeks ended in 2010. […]
[S]ince U.S. crude briefly climbed over $50 a barrel in May and June, drillers have added 116 oil rigs. Analysts said prices over $50 were high enough to prompt energy firms to return to the well pad…Looking ahead, analysts forecast energy firms would boost spending to capture higher oil prices expected in 2017 and 2018.
This was always a threat to any OPEC intervention strategy, and it’s part of why the Saudis took so long to even entertain the idea of doing anything other than pumping as much crude as they possibly could. American output has taken a hit over the past year and a half as a result of the fall in oil prices, but while the shale industry has been forced to idle its less productive (and therefore less profitable) rigs, it hasn’t itself been simply waiting for a rebound. Rather, companies have busied themselves inventing new ways to squeeze more oil and gas out of the ground for less money and time invested, and as a result they’ve defied most analyst expectations by preventing output from falling off the proverbial cliff.
Now that prices are creeping back up again, the leaner, meaner U.S. fracking industry is ready to pounce. OPEC (and perhaps Russia, as well) says its willing to ratchet back production to ease the world’s glut of crude, but America’s private companies aren’t going to play ball. Instead, they’re going to seize the opportunity to gain a greater share of what has become a very crowded market in recent years.