U.S. energy firms this week reduced the number of oil rigs operating for a fourth week in a row as producers cut spending, leading to slower growth in crude output.
Drillers cut five oil rigs in the week to Sept. 13, bringing the total count down to 733, the lowest since November 2017, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
In the same week a year ago, there were 867 active rigs.
More than half the total U.S. oil rigs were in the Permian basin in West Texas and eastern New Mexico, where active units fell by eight this week to 419, their lowest since January 2018. The Permian is the biggest U.S. shale oil play.
That was the largest weekly reduction in rigs in the Permian since February 2016 when drillers also cut eight rigs.
The oil rig count, an early indicator of future output, has declined over a record-tying nine months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
Amid the drilling slowdown, the Energy Information Administration (EIA) this week revised lower its growth forecast for U.S. crude production. It said output is expected to rise by 1.25 million barrels per day (bpd) in 2019 to a record of 12.24 million bpd, slightly lower than its previous forecast for a rise of 1.28 million bpd.
U.S. crude production remained close to a record level in June but growth has slowed significantly since the end of last year in response to lower oil prices and the slowdown is set to extend into 2020, according to John Kemp, a Reuters market analyst.
Production has continued to rise despite the decline in the rig count in part because productivity has increased in most shale basins this year, meaning drillers are getting more oil and gas out of each new well even though they are operating fewer rigs.
One new technology allowing drillers to cut costs is electric fracking powered by natural gas instead of costly diesel fuel. In some basins, like the Permian, electric fracking is a good way to use some of the gas that comes out of the ground with oil.
In an effort to keep pumping oil, some producers without access to pipelines to transport gas to markets have either flared some of their gas away or paid others with access to pipelines to take it.
U.S. crude futures traded around $55 per barrel on Friday, putting the contract on track to fall for the first week in three as concerns about a slowdown in global economic growth outweighed hints of progress in the U.S.-China trade dispute.
Looking ahead, U.S. crude futures were trading around $55 a barrel for the balance of 2019 and $53 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% 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 plan to spend about $80.5 billion in 2019 versus $84.6 billion in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 991. Most rigs produce both oil and gas.
The number of U.S. gas rigs, meanwhile, fell seven to 153, the least since March 2017.