U.S. energy companies this week cut oil rigs for a second time in the past three weeks as the rate of growth has slowed over the past couple of months with recent declines in crude prices.
Drillers cut two oil rigs in the week to Aug. 3, bringing the total count down to 859, Baker Hughes, a GE company, said in its weekly report.
More than half the total oil rigs are in the Permian Basin in west Texas and eastern New Mexico, the nation’s biggest shale oil field. Active units there held steady at 479 for a second week in a row, the same as in early June and the highest since January 2015.
The U.S. rig count, an early indicator of future output, is higher than a year ago when 765 rigs were active as energy companies have been ramping up production in anticipation of higher prices in 2018 than previous years.
U.S. crude prices were on track to fall for a fifth week in a row on worries the U.S.-China trade dispute could cut oil demand.
So far this year, U.S. oil futures have averaged $66.23 per barrel. That compares with averages of $50.85 in 2017 and $43.47 in 2016.
Looking ahead, crude futures were trading near $67 for the balance of 2018 and over $64 for calendar 201.
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co. this week said the E&P companies they track have provided guidance indicating a 15% increase this year in planned capital spending.
Cowen said those E&Ps expect to spend a total of $83.6 billion in 2018, up from an estimated $72.8 billion in 2017.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast average total oil and natural gas rig count would rise from 876 in 2017 to 1,032 in 2018, 1,092 in 2019 and 1,227 in 2020. That compares with their forecast last week of 1,033 in 2018, 1,092 in 2019 and 1,227 in 2020.
Since 1,044 oil and gas rigs were already in service, drillers would only have to add a handful of rigs during the rest of the year to hit Simmons’ forecast for 2018.
So far this year, the total number of oil and gas rigs active in the United States has averaged 1,010. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.