U.S. energy firms this week reduced the number of oil rigs operating for the second week in a row, with the rig count at its lowest since March 2018, as some drillers follow through on plans to cut spending.
Despite those cuts, production in the nation’s biggest shale formations was expected to keep rising from record levels.
Drillers cut three oil rigs in the week to May 17, bringing the total count down to 802, below the 844 units operating a year ago, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
More than half the total U.S. oil rigs are in the Permian basin, where active units decreased by three this week to 454, matching a recent low hit in March that was the lowest since April 2018.
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.
The Energy Information Administration (EIA) this week projected U.S. oil output from seven major shale formations would rise to a fresh record high of 8.49 million barrels per day (bpd) in June.
U.S. crude futures , meanwhile, were trading around $63 per barrel on Friday, putting the contract on track to rise almost 3% for the week as supply cuts and concern over potential further disruption to Middle East shipments.
Looking ahead, crude futures were trading around $63 a barrel for the balance of 2019 and $60 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% 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% 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 1,029. 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.
(Reporting by Scott DiSavino Editing by Marguerita Choy)