U.S. energy firms cut oil rigs for a second week in a row this week, prolonging a move by drillers over the past month to reduce the number of active rigs after crude prices collapsed in October and November.
Drillers cut four oil rigs in the week to Dec. 14, bringing the total count down to 873, the lowest since mid October, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. RIG-OL-USA-BHI
More than half the total U.S. oil rigs are in the Permian Basin, the country’s biggest shale oil formation. Active units there declined by three this week to 486, the lowest since early October.
The U.S. rig count, an early indicator of future output, is higher than a year ago when 747 rigs were active as energy companies have spent more to capture higher prices.
U.S. crude futures were trading around $51 a barrel on Friday, down more than 2 percent for the week, on data showing slower economic growth in China. [O/R]
That put the front-month up less than 1 percent so far in December after the contract crashed almost 11 percent in October and 22 percent in November.
Crude futures for calendar 2019 and 2020 were trading around $53/bbl.
U.S. financial services firm Cowen & Co this week said the exploration and production (E&P) companies it tracks have provided guidance indicating a 23 percent increase this year in planned capital spending.
Cowen said the E&Ps it tracks expect to spend a total of $89.1 billion in 2018. That compares with capital spending budgets for $72.2 billion in 2017. Cowen said early 2019 spending plans were mixed.
Hess Corp said this week it would boost capital spending by 38 percent in 2019 to $2.9 billion, noting its oil and natural gas output should see compound annual production growth through 2025 of more than 10 percent due in part to development of its Bakken shale projects.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and natural gas rig count would rise from 876 in 2017 to 1,031 in 2018, 1,092 in 2019 and 1,227 in 2020.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,030. That keeps the total count for 2018 on track for the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
The U.S. Energy Information Administration (EIA) this week projected average annual U.S. production will rise to a record 10.9 million barrels per day (bpd) in 2018 and 12.1 million bpd in 2019 from 9.4 million bpd in 2017.
The current all-time U.S. annual output peak was in 1970 at 9.6 million bpd, according to federal energy data.