U.S. energy firms cut oil rigs for a second week in a row as more producers, like Occidental Petroleum Corp., turned conservative in their 2019 drilling plans due to uncertainty over a recovery in crude prices.
Drillers cut four oil rigs in the week to Jan. 11, bringing the total count down to 873, Baker Hughes, a GE company, said in its closely followed report.
The U.S. rig count, an early indicator of future output, is still much higher than a year ago when 752 rigs were active after energy companies boosted spending in 2018 to capture higher prices that year.
Occidental, one of the largest producers in the Permian Basin, the biggest U.S. oil field, said Jan. 7 it expected to spend $4.4 billion to $5.3 billion this year, compared with about $5 billion spent in 2018, depending on the price of crude oil.
Shale producers said they expect to reduce their drilling activity in 2019 following a near 40% decline in crude prices during the last quarter of 2018 and mounting fears of global oversupply.
If correct, that would be the first decline in the rig count in three years after drillers added 138 oil rigs in 2018 and 222 in 2017. They cut 11 rigs in 2016.
Those past rig increases helped boost U.S. oil production to a projected all-time high of 10.9 million barrels per day (MMbbl/d) in 2018, according to federal estimates, topping the current record of 9.6 MMbbl/d in 1970. Official data for 2018 is not yet available.
U.S. crude futures were trading nearly 2% lower at below $52 per barrel on Jan. 11, but set for their second straight weekly gains on hopes the United States and China may soon resolve their trade dispute, which should boost global demand.
Looking ahead, crude futures were trading around $53 per barrel for the balance of 2019 and above $54 for calendar 2020. Spot crude prices at the U.S. West Texas Intermediate benchmark averaged $65.23 in 2018.
U.S. financial services firm Cowen & Co. this week said the E&P companies it tracks have provided mixed guidance for 2019 after indicating they would spend about $88.7 billion in 2018, a 23% increase over the $72.2 billion they spent in 2017.
Cowen said the firms it tracks, like Antero Resources Corp., were so far only expecting to add nine rigs this year.
Antero this week announced a 2019 drilling and completion budget of $1.1 billion to $1.25 billion, down about 15% from 2018, according to Cowen.
There were 1,075 oil and natural gas rigs active in the United States this week, according to Baker Hughes. Most rigs produce both oil and gas.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and gas rig count will fall from 1,032 in 2018 to 999 in 2019 before rising to 1,087 in 2020.
That is a slight reduction in Simmons forecast from last week of 1,001 rigs in 2019 and 1,094 in 2020.
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.
There will be no seismic exploration this winter on the coastal plain of the Arctic National Wildlife Refuge (ANWR), the Interior Department said on Feb. 8, after the company seeking permission to conduct the tests ran out of time to get the required permit.
U.S. oil producers sought on Jan. 23 to soothe OPEC's worries about losing market share, telling the group that investors in the U.S. firms wanted a reduction in growth and higher payouts.