U.S. energy firms reduced the number of oil rigs operating for the first time in four weeks as some companies expect output growth from shale formations to slow as producers cut spending on new drilling for a second consecutive year in 2020.
Drillers cut 1 oil rig in the week to Feb. 28, bringing the total count down to 678, energy services firm Baker Hughes Co said in its closely followed report on Friday.
That is a decline of 20% from the same week last year when 843 rigs were active.
In February, drillers added 3 rigs, their second monthly increase in three months.
U.S. crude futures traded around $45 per barrel on Friday, putting the contract on track to fall by the most in a week since 2008 as the global spread of the coronavirus stokes demand fears.
Looking ahead, U.S. crude futures were trading around $45 a barrel for the balance of 2020 and about $47 for calendar 2021 . That compares with an average of $57.04 in 2019.
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 to meet shareholder demand for better financial returns in a low energy price environment.
The U.S. Energy Information Administration projected crude output will rise about 8% in 2020 to 13.2 million barrels per day (bpd) and 3% in 2021 to 13.6 million bpd from a record 12.2 million bpd in 2019.
Growth in U.S. shale oil production will slow sharply over the next two years, the chief executive officer of U.S. oilfield services giant Schlumberger NV said on Tuesday.
U.S. financial services firm Cowen & Co said 40 of the independent E&Ps it watches reported spending estimates for 2020, implying a 13% year-over-year decline in 2020.
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.