U.S. oil drillers cut rigs for ninth week in ten -Baker Hughes

Fri Jan 22, 2016 1:05pm EST
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Jan 22 (Reuters) - U.S. energy firms this week cut oil rigs
for a ninth week in the last ten, data showed on Friday, and
were expected to shed more in coming weeks due to a recent
collapse in crude prices to the lowest levels since 2003.
    Drillers removed five oil rigs in the week ended Jan. 22,
bringing the total rig count down to 510, the least since April
2010, oil services company Baker Hughes Inc said in its
closely followed report.
    That compares with 1,317 oil rigs operating in same week a
year ago. In 2015, drillers cut on average 18 rigs per week for
a total of 963 oil rigs for the year, the biggest annual decline
since at least 1988. 
    U.S. crude oil futures soared over 7 percent on Friday as a
cold snap boosted demand for heating oil and investors took
advantage of the lowest prices since 2003 to close out some of
their more profitable bets on price declines. 
    Despite the gains, U.S. crude was still down about 15
percent since the start of the year due to a persistent glut and
weak demand.
    Front-month U.S. crude futures were trading around
$31 a barrel on Friday, but were fetching $35 on average for the
rest of 2016 and nearly $40 for 2017.
    As energy firms reduce capital spending plans for 2016 due
to the collapse in crude prices, analysts forecast drillers
would be slower than previously expected to return to the well
pad later this year.
    "We continue to believe the rig count during the first
quarter will represent the bottom, but now model slower growth
for the remainder of 2016," analysts at Evercore ISI, an
investment banking advisory firm, said in a note.
    Despite its forecast for slower growth, however, Evercore
said it expects the total number of U.S. natural gas and oil
rigs to rise each quarter for the rest of the year after
bottoming in the first quarter.
    Evercore warned it could reduce its rig count forecast
further as the decline in oil prices and recent guidance from
exploration and production companies points to bigger capital
spending cuts.
    "We would not be surprised to see U.S. spending fall 40
percent to 50 percent in 2016," Evercore said, noting its
initial survey of exploration and production companies pointed
to a spending decline of 30 percent in 2016.
    Southwestern Energy Co, an independent oil and gas
company based in Houston, this week said it would lay off 1,100
employees or nearly 40 percent of its workforce, as it slows
drilling activity in response to the prolonged slump in oil
    General Electric Co on Friday reported an 8 percent
drop in fourth quarter earnings in its industrial businesses due
to weakness in divisions catering to the oil and gas sector.
    Those spending cuts are having and impact on production.
    U.S. crude oil production averaged about 9.4 million barrels
per day in 2015 and was forecast to average 8.7 million bpd in
2016 and 8.5 million bpd in 2017, according to the U.S. Energy
Information Administration's latest Short-Term Energy Outlook.

 (Reporting by Scott DiSavino; Editing by Marguerita Choy)