U.S. energy companies cut oil rigs for the second week in three as the rig count has stagnated over the past three months along with crude prices.
Drillers cut two oil rigs in the week to Sept. 7, bringing the total count down to 860, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
The U.S. rig count, an early indicator of future output, rose by one in August after gaining three rigs in July and losing one in June. But is higher than a year ago when 756 rigs were active as energy companies have been ramping up production in anticipation of higher prices in 2018 than previous years.
So far this year, U.S. oil futures have averaged $66.47 per barrel. That compares with averages of $50.85 in calendar 2017 and $43.47 in 2016.
This week, U.S. crude prices were on track to decline almost 4 percent to $67.41 per barrel on a build in refined fuel inventories, a strong dollar, weak equity markets and Tropical Storm Gordon’s smaller-than-expected impact on U.S. Gulf Coast oil production.
Looking ahead, crude futures were trading over $67 for the balance of 2018 and near $65.50 for calendar 2019 .
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co this week said the exploration and production (E&P) companies it tracks have provided guidance indicating an 18 percent increase this year in planned capital spending.
Cowen said the E&Ps it tracks expect to spend a total of $85.2 billion in 2018. That compares with projected spending of $72.2 billion in 2017.
Two drilling companies, Halliburton Co and Schlumberger NV , both warned this week that pipeline bottlenecks in the Permian basin, the largest U.S. shale oil formation, would slow oil production growth and investments in the region.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, last week forecast the average combined 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.
Since 1,048 oil and gas rigs were already in service, drillers would only have to add a handful of rigs during the rest of the year to hit Simmons’ forecast for 2018.
So far this year, the total number of oil and gas rigs active in the United States has averaged 1,016. 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.