U.S. energy firms this week reduced the number of oil rigs operating for a third week in a row as weaker oil prices encourage drillers to follow through on plans to cut spending.
Drillers cut five oil rigs in the week to May 24, bringing the total count down to 797, the lowest since March 2018, General Electric Co.'s Baker Hughes energy services firm said in its closely followed report on Friday.
That compares with 859 rigs operating during the same week a year ago.
The rig count, an early indicator of future output, has declined over the past five months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Pioneer Natural Resources Co., one of the largest producers in the Permian Basin of West Texas and New Mexico, announced on Tuesday that it had cut about a quarter of its workforce to save costs and boost shareholder value.
U.S. crude futures were trading around $58 per barrel on Friday, putting the contract on track for its biggest weekly drop of the year, due to rising inventories and concern over an economic slowdown.
Looking ahead, crude futures were trading around $58 a barrel for the balance of 2019 and $56 in calendar 2020.
U.S. financial services firm Cowen & Co. this week said that projections from the exploration and production (E&P) companies it tracks point to a 5 percent decline in capital expenditures for drilling and completions in 2019 versus 2018.
Cowen said independent producers expect to spend about 11 percent less in 2019, while major oil companies plan to spend about 16 percent 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 1,027. 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 a four-year high of 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.
Drillers cut 11 oil rigs in the week to June 7, bringing down the total count to 789, Baker Hughes, a GE company, said in its weekly report.
Drillers cut one oil rig in the week to June 14, bringing down the total count to 788, still the lowest since February 2018, Baker Hughes, a GE company, said in its weekly report.
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.