28 May 2016, Houston — U.S. oil drillers cut rigs for a ninth week in the last 10, energy services company Baker Hughes Inc said on Friday, even as crude prices this week tested a seven-month high at $50 a barrel.
Prices were on track to recover for seven out of the last eight weeks, and are now at the high end of a level that analysts and producers had said could soon trigger a return to the well pad.
Drillers cut two oil rigs in the week to May 27, bringing the total rig count down to 316, the lowest since October 2009 and about half the 646 rigs of a year ago, Baker Hughes said in its closely followed report.
Before this week, drillers cut on average 11 oil rigs per week for a total of 218 so far this year.
They cut on average 18 oil rigs per week for a total of 963 in 2015, the biggest annual decline since at least 1988 amid the biggest rout in crude prices in a generation.
The rig count has dropped since hitting a peak of 1,609 in October 2014 as U.S. crude futures fell from over $107 a barrel mid-2014 to a near 13-year low around $26 in February.
U.S. oil futures have recouped about half of their losses. They broke above the $50-mark on Thursday and were trading around $49 on Friday with analysts predicting range-bound markets for the next few months as supply outages slowly help clear a glut of crude. [O/R]
U.S. oil executives and analysts have said any price rise above $50 could fuel a resurgence in new drilling projects.
“For approximately two weeks, crude has held steady in the $45-50 range. During the first quarter earnings season, a number of exploration and production companies indicated that prices near that range could lead them to add rigs,” analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, said this week in a note.
“These anecdotes lead us to believe that a modest improvement in the rig count could develop beginning in the coming weeks,” Simmons said.
The U.S. rig count generally reacts to prices with a three or four-month lag.
Further ahead, crude futures were fetching around $50 for the balance of 2016 and over $51 for calendar 2017.
The rig count is one of the several indicators of future production.
U.S. crude output is expected to fall from 9.4 million barrels per day in 2015, the highest since 1972, to 8.6 million b/d in 2016 and 8.2 million b/d in 2017, according to federal estimates.
*Scott DiSavino; Editing – Chizu Nomiyama & David Gregorio – Reuters