US oil drillers pull 13 rigs, biggest drop in 4 weeks -Baker Hughes

30 May 2015 | Author: | No comments yet »

Oil Prices Extend Gains as Drilling Activity Drops Again.

Houston • the number of rigs exploring for oil and natural gas in the U.S. declined by 10 this week to 875, oilfield services company Baker Hughes Inc. said Friday. Oil explorers idled rigs in U.S. fields for the 25th straight week, drawing out an unprecedented retreat in drilling that has curbed the country’s shale oil boom and helped crude prices rally.Energy firms pulled another 13 rigs from U.S. oil fields this week, the biggest drop in four weeks, data showed on Friday, showing that a near six-month slump in activity had yet to run its course despite a rebound in crude oil prices.Oil producers have cut back sharply on capital spending and new drilling after surging U.S. shale-oil output helped push the global crude market into oversupply last year. However, in the Eagle Ford basin in South Texas, the nation’s second biggest shale oil field, drillers added one oil rig in the third weekly increase in a row, bringing the total up to 90.

However, a drop in production has yet to show up in government data, and some analysts warned in recent weeks that the rig count was nearing a trough. The market has been eyeing the U.S. rig count and the increases of a few rigs in some basins over the past few weeks ahead of next week’s meeting of the Organization of the Petroleum Exporting Countries, which is to decide on crude production levels of its 12 members. With U.S. oil prices hovering around $60 a barrel, some shale producers say they are ready to add rigs and increase production, which could keep oil prices lower for longer. “People were thinking, ‘Oh, maybe we’ve bottomed,’” said Mark Anderle, director of supply and trading at TAC Energy. “This—even though on its own it’s not a big number—it defeats that theory.” Light, sweet crude for July delivery settled up $2.62, or 4.5%, at $60.30 a barrel on the New York Mercantile Exchange, posting the largest one-day gain since April 15.

The U.S. pumped 9.57 million barrels a day in the seven days ended May 22, the most in weekly Energy Information Administration data going back to 1983. The Permian Basin of Texas and New Mexico, the country’s biggest oil field, and the Williston Basin, home of North Dakota’s prolific Bakken shale, each lost one. “Most service companies we speak with feel that ‘the bottom is in’ for U.S. drilling,” Raymond James Ltd. energy analysts including Andrew Bradford said in an e-mailed research note Thursday. “Our estimates had forecast a bottoming in mid-June followed by a painstakingly slow recovery until mid- to late fall, at which point the recovery pace picks up modestly.” California’s producers idled three oil rigs, dragging the state’s total count to 10, the lowest since at least 1991 when Baker Hughes began releasing state-by-state data.

While most market watchers expect OPEC will stick to its decision not to cut output, the meeting will be closely watched for clues about the organization’s next moves. Goldman forecast the crude market will remain oversupplied through 2016 with U.S. producers set to increase drilling again and Saudi Arabia, Iraq and Russia on track to grow production sharply. “The longer this price decline takes to materialize, the greater the price downside given our already projected high inventories into 2016, especially in the United States,” Goldman said in the report.

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