U.S. oil explorers idled rigs for the 12th straight week, extending the steepest dropoff in drilling on record as crude prices headed for a second week of losses, Bloomberg reported Feb. 27.

Rigs targeting oil in the U.S. fell by 33 to 986, dropping below 1,000 for the first time since June 2011, Baker Hughes Inc. (NYSE: BHI) said on its website Feb. 27. Those seeking gas dropped by nine to 280, the Houston-based field services company said. The total U.S. count declined by 43 to 1,267, including a miscellaneous rig.

The U.S. has lost more than a third of its oil rigs over four months in an unprecedented retrenchment in drilling that threatens to bring the nation’s shale boom to a halt as early as this year. Collapsing oil prices have already wiped out thousands of U.S. jobs and dried up more than $86 billion in capital spending as domestic producers face stiff competition from suppliers abroad.

“Rigs continue to be laid up but at a much slower pace,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston. “We are going to see the oil market continue to slide down to the low $40s.”

Analysts are watching the rig count to help forecast U.S. production. The idling of 589 rigs in 12 weeks hasn’t yet cut output, which is forecast by the Energy Information Administration (EIA) to climb to 9.3 million barrels a day (MMbbl) this year, the highest since 1972. Output rose 5,000 bbl/d in the week ended Feb. 20 to reach 9.29 MMbbl, the highest rate in weekly EIA data going back to 1983.

Record Production

Crude stockpiles swelled 8.43 MMbbl to a record 434.1 MMbbl over the same period, EIA data show.

“You can’t really look at rig counts and make an assessment of what this will do with production,” Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania, said by phone. “We are seeing record production week in and week out regardless.”

The U.S. benchmark WTI oil for April delivery rose 50 cents to $48.67/bbl on the New York Mercantile Exchange at 1:28 p.m. New York time. Prices tumbled 49% in the last half of 2014. WTI’s discount to Brent crude has widened to more than $12/bbl this month from $4.75 thanks to the ample supplies and production combined with U.S. laws against most crude exports.

Rebalancing Market

U.S. oil drillers Chesapeake Energy Corp. (NYSE: CHK) and Continental Resources Inc. (NYSE: CLR) joined the droves of companies this week presenting analysts with spending cuts amid falling prices. The “sharp drop in expenditures” will slow oil production growth in North America this year, with fourth-quarter output potentially flat compared with the year earlier, Evercore ISI said in its Feb. 22 report.

“I want to compliment our industry for their prompt response to today’s low oil price environment,” Continental Resources CEO Harold Hamm said in a call with analysts Feb. 25. “These actions will accelerate the rebalancing of supply and demand and facilitate the recovery of more rational prices.”

U.S. producers are facing increasing competition from OPEC, which accounts for about 40% of the world’s oil and has refused to curb output. OPEC production climbed 163,000 bbl/d to 30.568 MMbbl this month, led by gains in Saudi Arabia, according to a Bloomberg survey of oil companies, producers and analysts.

Analysts at Wood Mackenzie Ltd. and Genscape Inc. have forecast that the number of rigs actively drilling in the U.S. will continue to slide into the second quarter before bottoming.

“The current rig count is pointing to U.S. production growth decelerating close to the level required in our view to balance the oil market,” Goldman Sachs Group Inc. said in a research note Feb. 20. “We continue to expect that lower prices will be required in order for the capex and rig cuts to materialize into sufficiently lower production growth.”