U.S. energy companies cut eight oil rigs this week, the biggest reduction since May 2016, extending a drilling decline that started over the summer when prices slipped below $50 a barrel.
The oil rig count fell to 729 in the week to Nov. 3, the lowest level since May, Baker Hughes, a GE company, (NYSE: BHGE) said in its weekly report. The rig count, an early indicator of future output, is still much higher than a year ago when only 450 rigs were active after energy companies boosted spending plans for 2017 in second-half 2016 as crude started recovering from a two-year price crash.
The increase in drilling lasted 14 months before stalling in August, September and October after some producers started trimming spending plans when prices turned softer over the summer.
U.S. oil production dipped to 9.2 million barrels per day in August, according to federal energy data released this week.
Overall, however, E&P companies expect to increase the amount of money they plan to spend on U.S. drilling and completions in 2017 by about 53% over 2016, according to U.S. financial services firm Cowen & Co. That was up from 50% in the firm’s prior capex tracking report last week. That expected 2017 spending increase followed an estimated 48% decline in 2016 and a 34% decline in 2015, Cowen said.
U.S. crude futures, which reached a high of $55.22 a barrel this week, which put them within a few cents of their highest since July 2015, have averaged almost $50 a barrel so far in 2017, easily topping last year's $43.47 average.
Looking ahead, futures were trading around $55 for the balance of the year and calendar 2018.
Cowen, which has its own U.S. rig count, said it expects a gradual decline in rigs in fourth-quarter 2017 and in 2018.
There were 898 oil and natural gas rigs active on Nov. 3. The average number of rigs in service so far in 2017 was 868. That compares with 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.