U.S. energy companies cut nine oil drilling rigs this week, the biggest reduction since May 2016, following a recent decline in crude prices.
The oil rig count fell to 860 in the week to Aug. 24, Baker Hughes, a GE company (NYSE: BHGE), said in its weekly report.
U.S. crude futures, trading about $69 per barrel, were down about 7% so far this quarter, heading for the first quarterly decline since the second quarter last year. Prices this week were on track to end a run of seven straight weekly declines on signs that Iran sanctions may limit global supply and that a trade war may not curb China’s appetite for U.S. crude.
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 759 rigs were active as energy companies have been ramping up production in tandem with OPEC's efforts over the past year-and-a-half to cut global output.
So far this year, U.S. oil futures have averaged $66.33 per barrel. That compares with averages of $50.85 in 2017 and $43.47 in 2016.
Looking ahead, crude futures were trading at $69 for the balance of 2018 and $66 for calendar 2019.
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co. this week said the E&P companies they track have provided guidance indicating a 18% increase this year in planned capital spending.
Cowen said those E&Ps expect to spend a total of $85.3 billion in 2018, up from an estimated $72.2 billion in 2017.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast average total oil and natural gas rig count would rise from 876 in 2017 to 1,031 in 2018, 1,092 in 2019 and 1,227 in 2020.
A total of 1,044 oil and gas rigs are currently in service.
So far this year, the total number of oil and gas rigs active in the United States has averaged 1,014. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
Year-to-date, the total number of oil and gas rigs active in the U.S. has averaged 1,025. Most rigs produce both oil and gas.
U.S. oil drillers this week cut the most rigs since the week to Jan. 18 and reduced the number of oil rigs operating for a second week in a row.
Russian oil output was stagnant at 10.97 million barrels per day for a third month in a row in May, again exceeding quotas set under a global deal.