Companies added three oil rigs in the week to May 31, bringing the total count to 800, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
That compares with 861 rigs operating during the same week a year ago.
For the month, drillers cut the number of rigs operating by five, their sixth monthly cut in a row. That is the most monthly declines in a row since May 2016 when the rig count fell for nine consecutive months.
The rig count, an early indicator of future output, has declined since December 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 futures were trading under $55 per barrel on Friday, their lowest since March and heading to their biggest monthly fall in six months as U.S. President Donald Trump ramped up trade tensions, boosting concerns oil demand will decline if the global economy slows.
Looking ahead, crude futures were trading below $55 a barrel for the balance of 2019 and under $54 in calendar 2020 .
“The rub for domestic producers is that the futures markets for both crude and natural gas are trading below spot prices, signaling the prospect of more pain on the horizon,” said Trey Cowan, senior analyst, S&P Global Platts Analytics.
“Presently, it appears likely the need for domestic rigs could continue to wane in lockstep with the price declines of the underlying commodities.”
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% 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.
U.S. crude oil production rose 241,000 barrels per day (bpd), or 2.1%, in March to 11.905 million bpd, just below its record high, the Energy Information Administration (EIA) said in its monthly 914 production report.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,025. Most rigs produce both oil and gas.
Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, 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.