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Shale Drilling Is on a Roll as OPEC Cuts Keep Oil Above $50

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Bailey Lipschultz, Bloomberg

Shale wildcatters pushed ahead on the biggest surge in U.S. oil drilling since 2012 as the explorers take advantage of prices above $50 for more than two months.

Rigs targeting crude in the U.S. rose by 6 to 597 this week, the highest total since October 2015, according to Baker Hughes Inc. data reported Friday. Drillers have added 72 rigs since 2017 began, the best start in five years. The expansion is spreading in Texas and Oklahoma, with the Granite Wash play leading the increase this time around.

Producers are cashing in on a more stable oil market, with prices swinging between $50 and $55 a barrel as the Organization of Petroleum Exporting Countries and 11 other nations cut back production to help reduce global supplies. Saudi Arabia told OPEC it reduced its oil output by the most in eight years, according to the group’s monthly report released Monday.

“We’re seeing the rise that we anticipated to take place given the OPEC cuts,” Bloomberg Intelligence analyst Andrew Cosgrove said by phone. “These gains are spreading to other plays, and this is something we’re expecting will continue through the first half given the stability in the price of oil.”

Oil producers have brought 281 rigs back to work since drilling bottomed out in May, the biggest gain since producers added 361 rigs over the nine months through June 2012.

U.S. crude inventories rose to 518.1 million barrels last week, the highest in weekly data going back to 1982, according to the Energy Information Administration.

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see also: Oil Rigs Data Show U.S. Shale Gains On OPEC, Russia Cuts