U.S. energy firms this week increased the number of oil rigs operating for the first time in three weeks even as crude output decelerates with the rig count dropping five months in a row due to spending cuts.
Companies added two oil rigs in the week to May 3, bringing the total count to 807, lower than the 834 rigs active this time last year, Baker Hughes, a GE company, said in its weekly report.
The U.S. 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.
U.S. crude production fell for a second month in a row in February to 11.7 million barrels per day as output dropped in the Gulf of Mexico and key onshore oil producing states including Oklahoma and North Dakota, according to the U.S. Energy Information Administration (EIA) on April 30.
The EIA said there were slight production increases in Texas and New Mexico where the Permian basin is located.
Major oil companies, like Exxon Mobil Corp. and Chevron Corp. are boosting their presence, particularly in the Permian, the largest U.S. shale oil field.
U.S. crude futures briefly fell below $61 per barrel this week, putting the contract on track for a second weekly decline in a row, as surging U.S. output countered production losses in sanctions-hit Iran and Venezuela.
Looking ahead, crude futures were trading around $62 per barrel for the balance of 2019 and $59 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 5 percent 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 $81.1 billion in 2019 versus $85.5 billion in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,034. That keeps the total count for 2019 on track to be the highest since 2014, which averaged 1,862 rigs. 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.
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.
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.
Drillers cut three oil rigs in the week to May 17, bringing down the total count to 802, below the 844 units operating a year ago, Baker Hughes, a GE company, said in its weekly report.