U.S. energy firms reduced the number of oil rigs operating for the first time in three weeks as producers follow through on plans to slash spending on new drilling for a second consecutive year in 2020.
Drillers cut one oil rig in the week to Jan. 31, bringing the total count down to 675, energy services firm Baker Hughes Co said in its closely followed report on Friday.
In the same week a year ago, there were 847 active rigs.
In January, the rig count declined for the 13th time in the past 14 months following an increase in December.
The oil rig count, an early indicator of future output, dropped in 2019 after rising 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 continues to increase. The pace of that production growth, however, is expected to slow.
U.S. crude futures traded around $51 per barrel on Friday, putting the front-month on track for a fourth straight weekly loss on mounting worries about economic damage from the coronavirus that has spread from China to around 20 countries.
Looking ahead, U.S. crude futures were trading around $51 a barrel for the balance of 2020 and $50 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 three to 112, 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 & Co, energy specialists at U.S. investment bank Piper Jaffray, 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.