Shale explorers returned to growth mode this week, adding the most rigs in a month as the Biden administration calls on them to unleash more crude to offset a ban on Russian oil.
The number of rigs drilling for crude in the U.S. rose by 8 to 527 this week, the biggest gain since Feb. 11, according to Baker Hughes Co. data released Friday. Most of the expansion, which follows last week’s drop of 3 oil rigs, came in the world’s busiest shale patch, the Permian Basin of West Texas and New Mexico.
President Joe Biden has urged U.S. oil companies to step up production as sanctions on Russia have helped push oil prices above $100 a barrel. West Texas Intermediate crude, which was already rallying before the war, is now 66% up since early November.
The plea for more production collides with commitments that major shale explorers have made to prioritize financial discipline over growth, though, and many are wary given Biden’s historic hostility toward fossil fuels and the risk that new drilling won’t pay off over the long term.
Drilling activity, which has become more efficient over time by allowing explorers to do more with fewer rigs and less spending, remains more than 20% below pre-pandemic highs.
The rig count is a closely watched metric because it’s indicative of future crude production. The relationship is imperfect, however, because of the time lag between drilling a well and commencing production. Most of the growth in the rig count over the past year or so has been from the closely held explorers looking to boost output in order to seek offers to get bought out.