U.S. energy firms reduced the number of operating oil rigs for the first time in three weeks as producers follow through on plans to slash spending on new drilling.
Drillers cut 8 oil rigs in the week to Dec. 27, bringing the total count down to 677, the lowest since the week to Nov. 15, energy services firm Baker Hughes Co said in its closely followed report on Friday.
In the same week a year ago, there were 885 active rigs.
That put the oil rig count down 208 for the year, its first annual decline since 2016. That reduction, however, is much smaller than the record 963 rigs cut in 2015, according to Baker Hughes data going back to 1987.
For the month, the rig count increased for the first time in 13.
For the quarter, the rig count fell for a fourth quarter in a row for the first time since 1999 when it dropped for a record seven consecutive quarters.
Before this month, the oil rig count, an early indicator of future output, dropped for a record 12 months in a row as independent exploration and production companies cut spending on new drilling as shareholders seek better returns in a low energy price environment.
Even though the number of rigs drilling new wells has fallen this year, U.S. oil output has continued to increase. In part this is because the productivity of remaining rigs – the amount of oil new wells produce per rig – has increased to record levels in most big shale basins.
The pace of production growth, however, has slowed.
The U.S. Energy Information Administration projected crude output would rise to 12.3 million barrels per day (bpd) in 2019 and 13.2 million bpd in 2020 from a record 11.0 million bpd in 2018.
U.S. crude futures traded around $62 per barrel on Friday, putting the contract on track to rise for the week on data showing that U.S. crude inventories fell more than expected, upbeat economic data and optimism over a U.S.-China trade deal.
Looking ahead, U.S. crude futures were trading around $60 a barrel for the balance of 2020 and $55 for calendar 2021 . That compares with an average of $64.90 in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 943. Most rigs produce both oil and gas.
The number of U.S. gas rigs, meanwhile, remained unchanged at 125, the lowest since Dec. 2016.