US Oil Drillers Cut Rigs for 6th Week
U.S. energy firms cut oil rigs for the sixth straight week, data showed on Friday, and were expected to shed more in coming weeks with three major U.S. shale oil companies slashing their spending plans after crude prices hit 12-year lows.
Drillers removed 12 oil rigs in the week ended Jan. 29, bringing the rig count down to 498, the least since March 2010, oil services company Baker Hughes Inc said in its closely followed report.
That compares with 1,223 oil rigs in same week a year ago. In 2015, drillers cut on average 18 rigs per week for a total of 963 oil rigs for the year, the biggest annual decline since at least 1988.
U.S. crude futures were trading around $33 a barrel on Friday, heading for a weekly gain with the front-month contract up about 25 percent over the 12-year low plumbed last week, on prospects that a deal between major exporters to cut production could help reduce one of the worst gluts in history.
Analysts forecast production will suffer as energy firms reduce capital spending plans for 2016 and cut the number of rigs drilling for oil due to the collapse in crude prices.
Three major U.S. shale oil companies this week slashed their 2016 capital spending plans more than expected in a bid to survive $30 a barrel oil prices, with one of them, Continental Resources, saying prices would need to rise to $37 just to turn a profit.
Looking forward, U.S. futures were fetching $38 on average for the rest of 2016 and nearly $43 for 2017.
The capex cuts by Hess Corp, Continental and Noble Energy ranged from 40 percent to 66 percent, marking the second straight year of pullbacks by a trio of companies normally seen as among the most resilient shale oil producers.
Baker Hughes, meanwhile, said this week that its North American revenues declined 17 percent compared with the prior quarter as the collapse in crude prices reduced customer demand for its rigs, among other things.
Baker Hughes forecast worldwide rig activity could fall by as much 30 percent in 2016 as customers continue to reduce spending in the current weak price environment.
Analysts at Goldman Sachs said production in 2016 would decline by about 345,000 barrels per day (bpd) at the current rig count assuming no well deferrals, which is a bigger cut than its estimate last week for a decline of 330,000 bpd.
U.S. crude oil production averaged about 9.4 million bpd in 2015 and was forecast to average 8.7 million bpd in 2016 and 8.5 million bpd in 2017, according to the latest U.S. Energy Information Administration's Short-Term Energy Outlook.
(Reporting by Scott DiSavino; Editing by Marguerita Choy)
