U.S. energy firms reduced the number of oil rigs operating for a seventh week in a row as year-long declines in the rig count have only curbed growth of record U.S. production, prompting OPEC to deepen cuts in an effort to bolster prices amid a global glut.
Drillers cut five oil rigs in the week to Dec. 6, bringing the total count down to 663, the lowest since April 2017, energy services firm Baker Hughes Co said in its closely followed report on Friday. RIG-OL-USA-BHI
In the same week a year ago, there were 877 active rigs.
That keeps the oil rig count on track to fall for the first year since 2016. The decline for this year, however, so far totals 222, which is much smaller than 2015’s record 963 rig decline, according to Baker Hughes data going back to 1987.
The oil rig count, an early indicator of future output, has already declined for a record 12 months in a row as independent exploration and production companies cut spending on new drilling as shareholders seek better returns in a low energy price environment.
U.S. crude futures traded around $59 per barrel on Friday, putting the contract on track to rise over 7% – their biggest weekly rise since June – after the Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to extend output cuts.
The so-called OPEC+ group of more than 20 producers agreed to an extra 500,000 barrels per day (bpd) in cuts for the first quarter of 2020, taking the total to 1.7 million bpd, or 1.7% of global demand.
Despite the OPEC+ production cuts, U.S. crude futures in coming years were still lower than spot prices with calendar 2020 trading around $57 a barrel calendar 2021 near $53.
Even with lower crude prices, the production outlook for North American shale appears robust in the years ahead.
U.S. crude output will rise to 12.3 million bpd in 2019 from a record 11.0 million bpd in 2018, according to government forecasts.
“In spite of the decline in spending and activity levels, the North American shale supply is not following the downward trend,” Sonia Mladá Passos, a product manager of Rystad Energy’s Shale Upstream Analysis team, said this weeek in a release. (Reporting by Scott DiSavino Editing by Marguerita Choy)