The biggest retreat from U.S. oil fields on record is showing signs of subsiding.
Oil explorers sidelined 41 drilling rigs this week, the smallest drop in three weeks and down from the average 59-rig decline in February. The count has fallen for 15 straight weeks to 825, reaching the lowest level in more than five years, Baker Hughes Inc. said on its website Friday.
The country has lost an unprecedented 750 oil rigs in the past 15 weeks as collapsing prices force drillers to let go of thousands of workers and retreat from shale formations. The slide in the rig count threatens to bring to a halt the oil production boom that turned the U.S. into the world’s largest fuel exporter.
“While we’re still going to see declines on a weekly basis, the retreat is definitely losing steam,” James Williams, president of energy consulting company WTRG Economics, said by phone on Friday from London, Arkansas. “We’re unlikely to see a 100-rig drop again. Eventually these declines will get smaller every week, if for no other reason than we have fewer rigs out there to stop drilling.”
The U.S. benchmark West Texas Intermediate oil for April delivery rose by $1.76 on Friday to settle at $45.72 a barrel on the New York Mercantile Exchange. Prices are down 58 percent from the 52-week high of $107.73 reached June 20.
The decline in the rig count so far is “solidifying our view that U.S. production will begin to decline in the second half of this year,” Evercore ISI analysts including James West said in a research note on March 16.
Rising Production
The slowdown in drilling hasn’t so far curbed U.S. oil production, which has continued to top records because of bigger and higher-yielding shale wells. Output rose 53,000 barrels a day last week to reach 9.42 million, the highest rate in weekly Energy Information Administration data going back to 1983.
Goldman Sachs Group Inc. said in a March 15 research note that the U.S. was still running enough rigs to boost U.S. oil production 230,000 barrels a day by the fourth quarter compared with a year earlier.
“U.S. producers are already preparing to ramp up activity later this year by successfully raising equity, reducing debt and building an uncompleted well war chest,” Goldman analysts including Damien Courvalin in New York wrote in the report.
Crude stockpiles swelled by 9.62 million barrels to a record 458.5 million in the week ended March 13, EIA data show.
OPEC Output
Contributing to the worldwide glut of oil is output from the Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil. Saudi Arabia, OPEC’s largest supplier, increased oil exports by 7.8 percent in January to the highest level in 11 months, according to the Joint Organisations Data Initiative.
OPEC doesn’t have a choice but to maintain its crude production to maintain market share, Kuwait Oil Minister Ali Al-Omair said in Kuwait City on Thursday.
The coming months will be “decisive” as the oil market waits to see whether drillers in U.S. shale plays such as North Dakota’s Bakken formation “stay true to their announcements” and actually scale back production, Vienna-based JBC Energy GmbH said in a research note March 16.
Rigs drilling for natural gas declined by 15 this week to 242, the fewest since 1992, the Houston-based field services company Baker Hughes said. The Marcellus formation of the eastern U.S. gained six gas rigs to reach 69, the highest in four weeks.
Natural gas futures for April delivery slipped 2.7 cents per million British thermal units to $2.786 on the Nymex. Prices are down 3.3 percent this year.
The total U.S. rig count, which includes two miscellaneous rigs, fell by 56 to 1,069, the fewest since October 2009.
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