US Oil Drillers Cut Rigs for Second Week in Three
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U.S. energy companies this week cut oil rigs for the second time in three weeks even though crude prices traded near their highest level since 2014.
Drillers cut five oil rigs in the week to Jan. 19, bringing the total count down to 747, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when only 551 rigs were active after energy companies boosted spending in 2017 as crude started recovering from a two-year price crash.
U.S. crude futures traded above $63 a barrel on Friday after hitting $64.89 this week, its highest since December 2014. That compares with averages of $50.85 in 2017 and $43.47 in 2016.
Looking ahead, futures were trading around $62 for thebalance of 2018 and $58 for calendar 2019.
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co said 23 of the roughly 65 E&Ps they track, including Antero Resources Corp, have already provided capital expenditure guidance for 2018 indicating an 8 percent increase in planned spending over 2017.
Cowen said the E&Ps it tracks planned to spend about $66.1 billion on drilling and completions in the lower 48 U.S. states in 2017, about 53 percent over what they planned to spend in 2016.
Antero said it planned to keep its drilling and completion capital budget flat at $1.3 billion annually through 2020.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray (PJR.SG), this week slightly increased their forecast for the total oil and natural gas rig count to an average of 1,004 in 2018 and 1,128 in 2019. Last week, it forecast 996 in 2018 and 1,126 in 2019.
There were 936 oil and natural gas rigs active on Jan. 19. On average, there were 876 rigs available for service in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
U.S. oil output is expected to continue to rise in February with production from shale formations rising by 111,000 barrels per day (bpd) to 6.55 million bpd, the U.S. Energy Information Administration said on Tuesday.
The global oil market has been closely watching U.S. output, which may continue to contribute to global oversupply even as OPEC members, Russia and other producers curb production. The agency previously said U.S. output could reach 10 million bpd in February and surge to 11 million bpd in 2019.
U.S. output peaked on an annual basis at 9.6 million bpd in 1970, according to federal energy data.
The question of whether the shale sector can continue at this pace remains an open debate. The rapid growth has stirred concerns that the industry is already peaking and that production forecasts are too optimistic.
(Reporting by Scott DiSavino; Editing by Marguerita Choy)
