Shale explorers boost activity further after OPEC’s ‘lifeline’

By David Wethe on 10/7/2016

HOUSTON (Bloomberg) -- Explorers added oil rigs in the U.S. for a sixth consecutive week after OPEC’s pledge to cut output livened up the crude market, allowing producers to lock in higher prices with hedge contracts.

Rigs targeting crude in the U.S. rose by 3 to 428, adding to the largest level of work since February. Producers haven’t pulled back activity since the end of June. Natural gas rigs fell by 2 to 94 this week, while miscellaneous rigs rose by 1 to 2, bringing the total for oil and gas up by 2 to 524.

Oil climbed above $50/bbl for the first time since June this week after the Organization of Petroleum Exporting Countries agreed to the first production cut in eight years. By resuming its policy to balance the market, the group threw a “lifeline” to U.S. shale firms and prompted them to hedge “in droves,” Harry Tchilinguirian, head of commodity research at BNP Paribas SA in London, said last week.

“Every time prices get above the $50 range we see a lot of activity coming in from producers selling into the rally,” said Hamza Khan, an analyst at ING Bank NV in Amsterdam.

The oil price recovery from a 12-year-low in February prompted producers to begin returning parked rigs to service after idling more than 1,000 rigs since the start of last year.

Crude output fell by 30,000 bpd to 8.47 MMbpd last week, the Energy Information Administration reported Wednesday.

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