U.S. energy firms reduced the number of oil rigs operating for a second week in a row, with the country’s production growth expected to slow as crude prices dropped close to their lowest levels of the year and most drillers cut spending.
Drillers cut one oil rig in the week to June 14, bringing the total count down to 788, still the lowest since February 2018, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
That compares with 863 rigs operating during the same week a year ago.
More than half the total U.S. oil rigs are in the Permian basin in West Texas and eastern New Mexico, where active units decreased by five this week to 441, the lowest since March 2018. The Permian is the biggest U.S. shale oil play.
The rig count, an early indicator of future output, has declined over the past six months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
U.S. crude production will rise 1.36 million barrels per day (bpd) to a record 12.32 million bpd in 2019, 140,000 bpd less than previously forecast, according to a monthly Energy Department report on Tuesday. That will top the current all-time high of 10.96 million bpd set in 2018.
U.S. crude futures fell below $51 per barrel this week, close to their lowest since January on fears trade disputes will dent global oil demand.
Looking ahead, crude futures were trading around above $53 a barrel for the balance of 2019 and below $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 will spend about $81.1 billion in 2019 versus $85.4 billion in 2018.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,020. Most rigs produce both oil and gas.
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 1,019 in 2019 before rising to 1,097 in 2020.
That is the same as Simmons predictions since early April.