U.S. energy firms this week reduced the number of oil rigs operating for the first time in three weeks as drillers follow through on plans to cut spending this year.Drillers cut five oil rigs in the week to July 3, bringing the total count down to 788, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Wednesday.
That compares with 863 rigs operating during the same week a year ago.
The rig count, an early indicator of future output, declined over the past seven months as independent exploration and production companies cut spending on new drilling as they focus more on earnings growth instead of increased output.
For the year, the U.S. Energy Information Administration (EIA) projects U.S. crude output will rise to 12.32 million barrels per day (bpd) in 2019, up from the annual record of 10.96 million bpd in 2018.
U.S. crude futures traded around $56 per barrel on Wednesday, putting the contract on track to fall about 3% for the week after rising a total of 11% over the prior two weeks as investors worried about the slowing global economy despite a decision by OPEC and its allies to extend output cuts.
Looking ahead, crude futures were trading around $57 a barrel for the balance of 2019 and $55 in calendar 2020 .
U.S. financial services firm Cowen & Co last 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 1,014. 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 992 in 2019 before rising to 1,011 in 2020 and 1,067 in 2022.