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US producers continue adding rigs

Despite recent falls in the price of oil due to concerns over the new Omicron variant, US oil producers continued to add more rigs for the sixth time in seven weeks.

In its weekly report, Baker Hughes, which provides services to the oil industry, said a further seven rigs had been added in the week to December 10, taking the total to 576. This is a 70% increase on the same week last year and the highest since April last year, when production was curtailed in response to plummeting oil prices.

The rig count is regarded as an indicator of future production, so extra rigs may help meet the growing demand for oil and gas for energy, fuels and derived products like slideway oil. Oil producers in the US – including many majors like ExxonMobil and BP, the owner of the Castrol brand – had previously been cautious about increasing production again, despite oil prices rising above $80 per barrel earlier in the year.

There are some concerns, however, that this new investment is being targeted at wells that had been drilled but uncompleted (DUC), with Gelber and Associates analysts warning in a note:

“Heavy reliance on the DUC well count is alarming as it is a finite short-term resource, and not one that is expected to support production long-term.”

Nevertheless, the US looks set to remain one of the world’s biggest oil producers, with government projections currently predicting that production will rise to 11.9 million barrels per day (bod) over 2022, not far from the record 12.3 million bpd in 2019.

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