U.S. Baker Hughes upbeat on oil price rise

By Reem Shamseddine

AL-KHOBAR, Saudi Arabia (Reuters) - U.S. oil services company Baker Hughes Inc (BHI.N: Quote, Profile, Research) expects a global slowdown to weigh on its business until the third quarter, but longer term rising oil prices would aid the industry, its top executive said on Saturday.

"We expect some weakness in the second and third quarter due to activity slowdown (globally)," Chad Deaton told Reuters, a day after Barclays Capital downgraded his firm's stock to "equal weight" from "overweight." [nBNG420952]

"But for the long term, demand for oil and gas will rise ... The slowdown is temporary," he added when asked about the impact of the global crisis on Baker Hughes.

But Deaton said rising oil prices would give a boost.

"In the last two weeks oil prices went up 10 percent. That's good news for the industry and clearly this means more activities are going to occur as the oil price continues to go up," he said on the sidelines of an industry conference in the eastern Saudi city of al-Khobar.

Barclays said North American drilling would be "weaker for longer" because of the poor outlook for natural gas prices, and that rig activity will not pick up on a sustained basis until mid-2010.

Baker Hughes, along with larger rivals Schlumberger Ltd (SLB.N: Quote, Profile, Research) and Halliburton Co (HAL.N: Quote, Profile, Research), reported lower earnings in the first-quarter after a slump in energy prices forced many firms to freeze expansion, including drilling activity.

NYMEX crude is up about 30 percent since the start of the year but it is still below half its record level of July.