U.S. energy firms cut the most oil rigs in a week since January as a 14-month drilling recovery stalled due to weak crude prices.
Drillers cut seven oil rigs in the week to Sept. 15, bringing the total count down to 749, the least since June, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
Drillers have not added any rigs since the week of Aug. 11.
The rig count, an early indicator of future output, is still higher than the 416 active oil rigs a year ago as energy companies had mapped out ambitious spending programs for 2017 when they expected U.S. crude to be higher than the $50 per barrel where they are currently trading.
Crude prices were up about 5 percent so far this month after declining in five of the past six months, including a near 6 percent drop in August as rising U.S. output helped to add to a global glut.
U.S. production is expected to rise to 9.3 million barrels per day (bpd) in 2017 and a record 9.8 million bpd in 2018 from 8.9 million bpd in 2016, according to federal energy projections this week.
Although several exploration and production (E&P) companies have trimmed their investments for this year due to the drop in crude prices, they still planned to spend much more this year than last year.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week revised higher its forecast for the total oil and gas rig count, now expecting it to rise to an average of 884 in 2017, 959 in 2018 and 1,114 in 2019. Last week, it forecast 863 in 2017, 932 in 2018 and 1,078 in 2019.
That compares with 857 oil and gas rigs so far in 2017, 509 in 2016 and 978 in 2015.
Analysts at U.S. financial services firm Cowen & Co’s capital expenditure tracking was unchanged this week, showing the 64 E&Ps it tracks planned to increase spending by an average of 49 percent in 2017 from 2016.
That expected 2017 spending increase followed an estimated 48 percent decline in 2016 and a 34 percent decline in 2015, Cowen said.