January 13, 2017 / 6:08 PM / 6 months ago

U.S. oil drillers cut rigs for 2nd week in 7 months -Baker

3 Min Read

Jan 13 (Reuters) - U.S. oil drillers cut rigs this week for
only the second week in the last seven months, likely just a
brief pause in a recovery expected to last into 2018 as shale
producers plan to boost spending as crude prices hold near an
18-month high.
    Drillers cut seven oil rigs in the week to Jan. 13, bringing
the total rig count down to 522, compared with 515 rigs seen a
year ago, according to energy services firm Baker Hughes Inc
 on Friday. RIG-OL-USA-BHI
    That decline ended the longest weekly streak of adding rigs
since August 2011. The current streak ended at 10. Drillers
added rigs for 19 weeks in 2011.
    Since crude prices first topped $50 a barrel in May after
recovering from 13-year lows in February, drillers have added a
total of 206 oil rigs in 29 of the past 33 weeks, the biggest
recovery in rigs since a global oil glut crushed the market over
two years starting in mid 2014.
    The Baker Hughes oil rig count plunged from a record 1,609
in October 2014 to a six-year low of 316 in May as U.S. crude
collapsed from over $107 a barrel in June 2014 to near $26 in
February 2016.
    U.S. crude futures were trading around $53 a barrel
on Friday and set for a weekly drop on lingering doubts over the
extent of planned cuts by the Organization of the Petroleum
Exporting Countries (OPEC) and concerns over the health of the
Chinese economy. 
    Growing U.S production has also weighed on the market as
U.S. crude output last week reached 8.95 million bpd last week,
the most since April of last year, U.S. Energy Information
Administration data showed. 
    "EIA data and our own government policies have to leave you
thinking that a U.S. production response may unwind all the
production cuts Saudi Arabia and others are planning," said Rob
Haworth, senior investment strategist at U.S. Bank Wealth
Management in Seattle.
    Analysts said they expect U.S. energy firms to boost
spending on drilling and pump more oil and natural gas from
shale fields in coming years now that energy prices are
projected to keep climbing.
    Futures for the balance of 2017 were trading
around $55 a barrel, while calendar 2018 was fetching
over $56.
    Analysts at Simmons & Co, energy specialists at U.S.
investment bank Piper Jaffray, this week forecast the total oil
and gas rig count would average 765 in 2017, 879 in 2018 and 990
in 2019. Most wells produce both oil and gas.
    That compares with an average of 509 in 2016 and 978 in
2015, according to Baker Hughes data.
    Analysts at U.S. financial services firm Cowen & Co said in
a note this week that its capital expenditure tracking showed 26
exploration and production (E&P) companies planned to increase
spending by an average of 34 percent in 2017 over 2016.
    That spending increase in 2017 followed an estimated 47
percent decline in 2016 and a 35 percent decline in 2015, Cowen
said according to the 65 E&P companies it tracks.

    
 (Reporting by Scott DiSavino; Editing by Marguerita Choy)

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