UPDATE 1-U.S. oil drillers cut rigs despite price recovery -Baker Hughes

Fri May 27, 2016 1:48pm EDT
 
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(New throughout, adds production data)
    By Scott DiSavino
    May 27 (Reuters) - U.S. oil drillers cut rigs for a ninth
week in the last 10, energy services company Baker Hughes Inc
 said on Friday, even as crude prices this week tested a
seven-month high at $50 a barrel.
    Prices were on track to recover for seven out of the last
eight weeks, and are now at the high end of a level that
analysts and producers had said could soon trigger a return to
the well pad.
    Drillers cut two oil rigs in the week to May 27, bringing
the total rig count down to 316, the lowest since October 2009
and about half the 646 rigs of a year ago, Baker Hughes said in
its closely followed report. RIG-OL-USA-BHI
    Before this week, drillers cut on average 11 oil rigs per
week for a total of 218 so far this year.
    They cut on average 18 oil rigs per week for a total of 963
in 2015, the biggest annual decline since at least 1988 amid the
biggest rout in crude prices in a generation.
    The rig count has dropped since hitting a peak of 1,609 in
October 2014 as U.S. crude futures fell from over $107 a
barrel mid-2014 to a near 13-year low around $26 in February.
    U.S. oil futures have recouped about half of their
losses. They broke above the $50-mark on Thursday and were
trading around $49 on Friday with analysts predicting
range-bound markets for the next few months as supply outages
slowly help clear a glut of crude. 
    U.S. oil executives and analysts have said any price rise
above $50 could fuel a resurgence in new drilling projects.
     
    "For approximately two weeks, crude has held steady in the
$45-50 range. During the first quarter earnings season, a number
of exploration and production companies indicated that prices
near that range could lead them to add rigs," analysts at
Simmons & Co, energy specialists at U.S. investment bank Piper
Jaffray, said this week in a note.
    "These anecdotes lead us to believe that a modest
improvement in the rig count could develop beginning in the
coming weeks," Simmons said.
    The U.S. rig count generally reacts to prices with a three
or four-month lag.
    Further ahead, crude futures were fetching around $50 for
the balance of 2016 and over $51 for calendar 2017
.
    The rig count is one of several indicators of future
production.
    U.S. crude output is expected to fall from 9.4 million
barrels per day in 2015, the highest since 1972, to 8.6 million
bpd in 2016 and 8.2 million bpd in 2017, according to federal
estimates. 

    
 (Reporting by Scott DiSavino; Editing by Chizu Nomiyama and
David Gregorio)