U.S. energy firms added oil rigs for the third time in four weeks even though producers planned to continue reducing spending on new drilling for a second consecutive year in 2020.
Companies added 1 oil rig in the week to Feb. 7, bringing the total count to 676, energy services firm Baker Hughes Co said in its closely followed report on Friday.
In the same week a year ago, there were 854 active rigs.
The oil rig count, an early indicator of future output, dropped by an average of 208 rigs in 2019 after rising 138 rigs in 2018 as independent exploration and production (E&P) companies cut spending on new drilling after shareholders sought better financial returns in a low energy price environment.
Even though the number of rigs drilling new wells fell last year, U.S. oil output continued to increase in part 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, is expected to slow in coming years after rising 18% in 2018 and 11% in 2019.
The U.S. Energy Information Administration projected crude output will rise about 9% in 2020 to 13.3 million barrels per day (bpd) and 3% in 2021 to 13.7 million bpd from a record 12.2 million bpd in 2019.
U.S. crude futures traded around $50 per barrel on Friday, putting the front-month on track to fall for a fifth week in a row as the coronavirus outbreak fans worries about global crude demand.
Looking ahead, U.S. crude futures were trading around $51 a barrel for the balance of 2020 and $51 for calendar 2021 . That compares with an average of $64.90 in 2018 and $57.04 in 2019.
U.S. financial services firm Cowen & Co said 26 of the independent E&Ps it watches reported spending estimates for 2020, implying a 13% year-over-year decline in 2020.
The number of U.S. gas rigs, meanwhile, fell by 1 to 111, the lowest since October 2016.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 791. Most rigs produce both oil and gas.
Analysts at Simmons Energy, energy specialists at U.S. investment bank Piper Sandler, have forecast the annual average combined oil and gas rig count will slide from 943 in 2019 to 816 in 2020 before rising to 848 in 2021.
That is the same as Simmons forecasts since early January and means Simmons expects the weekly rig count will rise from its current level later in the year.