UPDATE 3-U.S. oil rigs dive to lowest since 2010, more cuts seen

Fri Jan 8, 2016 5:01pm EST
 
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    Jan 8 (Reuters) - U.S. oil drillers began the year by
slashing the number of rigs to the lowest in over five years,
data showed on Friday, with analysts saying further reductions
are almost certain as producers respond to a deepening oil price
rout.
    Drillers cut 20 oil rigs in the week ended Jan. 8, the
third-largest one-week decline since May, oil services company
Baker Hughes Inc said in its closely followed report.
The reductions occurred across every major shale patch, from the
Permian to the Bakken. RIG-OL-USA-BHI 
    The remaining 516 rigs were the fewest since April 2010,
according to the data, but few expect the slump to end there.
Oil prices have dropped more than $10 a barrel over the past two
months, about half of that in the past week. Lower prices are
likely to be reflected in more idled rigs over the coming month
or two.
    "So long as the price for oil stays low, the rig count will
continue to decline," said Arthur Gelber, founder and president
of energy consulting and advisory firm Gelber and Associates in
Houston.
    U.S. oil futures on Friday failed to draw any support
from the sharp fall in rigs, settling at $33.16 a barrel, the
lowest since Feb. 2004. Investors remain worried about a
persistent global glut and a bleak demand outlook.
    U.S. crude futures dropped 30 percent last year.
    The rig count decline was the seventh reduction in the past
eight weeks and brings the total rig count down to about a third
of the 1,421 oil rigs operating in same week a year ago.
    In 2015, drillers idled a total of 963 oil rigs, the first
annual cut since 2002 and the biggest annual decline since at
least 1988, according to Baker Hughes.
    Over the prior five years (2010-2014), producers added on
average 216 oil rigs per year. In 2015, however, they cut on
average 18 oil rigs per week.
    U.S. crude futures were trading at higher levels around $38
a barrel for the rest of 2016 and $43 for 2017. Some
analysts said this could entice producers to return to drilling
later this year.
    One of the biggest U.S. independent drillers, Pioneer
Natural Resources Co, said this week its preliminary
2016 production growth forecast was 10 percent to 15 percent
compared with 2015.
    Pioneer said it still forecasts compound annual production
growth of 15 plus percent over 2016 through 2018, assuming the
addition of two rigs to three rigs per year during 2017 and
2018.
    This week, drillers cut four oil rigs in the Bakken in North
Dakota and Montana, bringing the total to 49, the lowest rig
count in the basin since at least 2009.
    U.S. natural gas rigs RIG-GS-USA-BHI, meanwhile, fell by
14 this week, knocking the overall oil and gas rig count to 664,
the lowest since August 1999.

    
 (Reporting by Scott DiSavino; Editing by Marguerita Choy  and
David Gregorio)