U.S. energy firms this week increased the number of oil rigs operating for the first time this year but the rig count in January fell the most in a month since April 2016, as the boom in the Permian, the nation’s biggest shale oil formation, cools.
Drillers added 10 oil rigs in the week to Jan. 25, bringing the total count to 862, Baker Hughes, a GE company, said in its closely followed report. More than half the total U.S. oil rigs are in the Permian where active units rose by three this week to 484, well short of a near four-year high of 493 in November.
For the month, drillers cut 23 rigs in January, the most removed in a month since April 2016. Over the past two months, they pulled two rigs in December and added 12 in November.
The U.S. rig count, an early indicator of future output, is still much higher than a year ago when 759 rigs were active after energy companies boosted spending in 2018 to capture higher prices that year.
In 2019, however, drillers have said they plan to remove rigs due in part to forecasts for lower crude prices than last year.
U.S. oil output from seven major shale formations is expected to rise to a record high 8.2 million barrels (MMbbl) per day in February, according to U.S. Energy Information Administration (EIA) projections this week. But the EIA said it expects the increase in Permian production for February to be the smallest in a month since May 2018, when output fell slightly.
Output from the Permian has come under pressure in recent months as oil prices crashed and a production surge there outpaced pipeline capacity, trapping barrels in the region.
The U.S. shale boom is set to cool this year, according to Reuters columnist John Kemp. A decline in prices late last year, which usually takes three-four months to impact drilling, will likely start to slow production growth during the second half of 2019.
U.S. crude futures were trading below $54 per barrel on Jan. 25, putting the front-month on track to slip for the first week in four as surging U.S. fuel stocks and global economic woes weighed on the market.
Looking ahead, crude futures were trading below $55 per barrel for the balance of 2019 and calendar 2020.
There were 1,059 oil and natural gas rigs active in the United States this week, according to Baker Hughes. Most rigs produce both oil and gas.
A U.S. appeals court on March 28 supported a lower court’s finding that Italian oil producer Eni SpA breached a contract with offshore drilling contractor Transocean Ltd., but voided a $160 million damages award.
Hurricane Energy’s FPSO vessel has been connected to the group’s North Sea Lancaster oil field on March 19, another milestone for the group as it seeks to extract so-called fractured basement oil in Britain.
Drillers cut two oil rigs in the week to Sept. 7, bringing the total count down to 860, Baker Hughes, a GE company, said in its weekly report.