U.S. energy firms this week reduced the number of oil rigs operating for a seventh week in a row as producers follow through on plans to cut spending on new drilling this year.
Drillers cut 3 oil rigs in the week to Oct. 4, bringing the total count down to 710, the lowest since May 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 861 active rigs.
The oil rig count, an early indicator of future output, has declined over a record 10 months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
That decline in the rig count helped cut U.S. crude output in July to 11.81 million barrels per day (bpd), its third monthly decline from a record high of 12.12 million bpd in April, according to a U.S. Energy Information Administration monthly report released on Monday.
U.S. crude futures , meanwhile, traded around $52 per barrel on Friday, putting the contract on track for its biggest weekly loss since mid July due to financial market concerns the slowing economy was on the brink of a recession amid lingering trade tensions.
Looking ahead, U.S. crude futures were trading around $52 a barrel for the balance of 2019 and $51 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 981. Most rigs produce both oil and gas.
The number of U.S. gas rigs, meanwhile, fell to 144, the least since January 2017.
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 951 in 2019 and 906 in 2020 before rising to 957 in 2021.
That is the same as Simmons forecasts since late September.