Companies added 4 oil rigs in the week to March 6, bringing the total count to 682, their highest since December, energy services firm Baker Hughes Co said in its closely followed report on Friday.
That is down 18% from the same week a year ago when 834 rigs were active.
Exxon, which analysts say is operating the most U.S. rigs, said on Thursday that it would cut about 20% of the 58 rigs it was operating in the Permian basin this year. The Permian, located in West Texas and eastern New Mexico, is the nation’s biggest shale oil basin.
The oil rig count, an early indicator of future output, dropped by an average of 208 in 2019 after rising 138 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.
U.S. crude futures traded around $42 per barrel on Friday, putting the contract on track to fall to its lowest since 2016 after Russia rejects steeper output cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to support prices.
Looking ahead, U.S. crude futures were trading around $43 a barrel for the balance of 2020 and $46 for calendar 2021 . That compares with an average of $57.04 in 2019.
The U.S. Energy Information Administration projected U.S. 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.
U.S. financial services firm Cowen & Co said 43 of the 46 independent E&Ps it watches reported spending estimates for 2020, implying an 11% year-over-year decline in 2020.
The number of U.S. gas rigs, meanwhile, fell one to 109, the lowest since October 2016.
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.