U.S. energy firms this week reduced the number of oil rigs operating for the third time in four weeks even as crude production forecasts increase despite some drillers cutting spending.
Drillers cut two oil rigs in the week to May 10, bringing the total count down to 805, Baker Hughes, a GE company, said in its weekly report. That put the U.S. rig count, an early indicator of future output, below the 844 drilling a year ago.
The rig count has declined over the past five months as independent E&P companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Major oil companies, like Exxon Mobil Corp. and Chevron Corp., however, are boosting their presence, particularly in the Permian Basin, the largest U.S. shale oil field.
The U.S. Energy Information Administration this week raised its forecast for U.S. crude output, projecting it would reach a record 12.5 million barrels per day (MMbbl/d) in 2019 and 13.4 MMbbl/d in 2020, up from the current all-time high of 11.0 MMbbl/d.
U.S. crude futures, meanwhile, were trading around $62 per barrel on May 10, leaving the contract little changed for the week as tightened global supplies overshadowed trade tensions stoked by a U.S. move to hike tariffs on Chinese goods.
Looking ahead, crude futures were trading just below $62 per barrel for the balance of 2019 and above $59 in calendar 2020.
U.S. financial services firm Cowen & Co. this week said that projections from the E&P companies it tracks point to a 5% decline in capex for drilling and completions in 2019 versus 2018.
Cowen said independent producers expect to spend about 11% less in 2019, while major oil companies plan to spend about 16% more.
In total, Cowen said all of the E&P companies it tracks that have reported will spend about $81.9 billion in 2019 versus $86.4 billion in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,031. Most rigs produce both oil and gas.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, however, forecast the average combined oil and gas rig count will slide from 1,032 in 2018 to 1,019 in 2019 before rising to 1,097 in 2020. That is the same as Simmons predictions since early April.