US Drillers Cut Rigs as Crude Prices Collapse

The resurgence in drilling seen earlier this month seemed to fizzle this week as U.S. energy firms cut seven oil rigs, oil services company Baker Hughes Inc data showed on Friday.

 

The decline came as U.S. crude oil prices have fallen nearly 15 percent this month in the biggest slump since December.

 

That was the 30th weekly oil rig decline in the past 31 weeks, bringing the total down to 638, the lowest since the last week in June, said Baker Hughes in its closely followed report.

 

"The rig count is a bullish element and might help keep U.S. crude above $50 (a barrel) and we might see some short covering rallies," said Dan Flynn, analyst at Price Futures Group in Chicago.

 

U.S. crude futures briefly turned higher after the report then fell back to $50.47 a barrel, down 44 cents on the day, at 1:22 p.m. EDT (1722 GMT). Brent crude was down 14 cents at $56.78, having held its small gains after the report, then retreating and seesawing near unchanged.

 

U.S. crude futures continued to decline this week, falling about 4.2 percent as prices continued to recede from a recent high over $62 in early May.

 

Production declines in the largest U.S. shale plays were set to deepen in August, the Energy Information Administration said earlier this week in its drilling productivity report. While the EIA expected declines from the Bakken and Eagle Ford, it forecast production growth from the Permian month-on-month of some 5,000 barrels per day.

 

This week, drilling in the Eagle Ford fell by four rigs, the Bakken cut two rigs and the Permian Basin added two rigs, Baker Hughes reported.

 

The drop in rig counts comes as Iran has started to ship oil to Asia that it had been storing offshore for months after Tehran and other world powers reached an agreement about the nation's nuclear program, clearing the way for an easing of international sanctions.

 

There is a sense that the declines in rigs have bottomed out and that companies will return to the oil patch.

 

But Phil Flynn, an analyst at Price Futures Group, cautioned that it is going take years to get near the record highs of the early boom.

 

WPX Energy Inc said on Tuesday that it plans to increase the rig count on its Permian assets from four to six by year end. The oil producer earlier said it would add two rigs in North Dakota this year and target a 20 percent boost in output by 2016.

 

Starting in July, Pioneer said it would add an average of two horizontal rigs per month through 2015 in the Permian Basin and another eight horizontal rigs in the Permian and Eagle Ford during the first quarter of 2016.