October 20, 2017 / 5:09 PM / a year ago

U.S. oil drillers cut rigs for a third week in a row -Baker Hughes

    By Scott DiSavino
    Oct 20 (Reuters) - The U.S. oil rig count fell for a third
week in a row, extending a two-month drilling decline, although
producers have sharply ramped up bets against a fall in oil
prices, which could spur another investment surge.
    The oil rig count fell seven to 736 in the week to Oct. 20,
the lowest level since June, General Electric Co's        Baker
Hughes energy services firm said in its closely followed report
on Friday. RIG-OL-USA-BHI    
    The rig count, an early indicator of future output, is still
much higher than a year ago when only 443 rigs were active after
energy companies boosted spending plans as crude recovered from
a two-year price crash.
    The recovery in drilling, however, lasted for 14 months
before stalling in August and September after producers trimmed
spending plans due to softer prices.
    U.S. crude futures        have averaged over $49 a barrel so
far in 2017, easily topping last year's $43.47 average. Looking
ahead, futures were trading around $51 for the balance of the
year           and $52 for calendar 2018          .
    With prices for 2018 at their strongest since April, there
has been a surge in hedging, that will allow U.S. shale
producers to keep drilling even if prices retreat, major oil
executives and bankers said in London this week.             . 
    Ben Montalbano, co-founder of PetroNerds, a Denver,
Colorado, research firm that tracks hedging at about 40
medium-sized oil producers, said those firms are more heavily
hedged than at any point in the past six quarters.
    U.S. shale production is expected to rise to a record high
6.1 million barrels per day (bpd) in November, according to
federal energy projections this week.             
    Analysts at Simmons & Co, energy specialists at U.S.
investment bank Piper Jaffray, this week revised slightly
downward their forecast for the total oil and natural gas rig
count, now expecting it to average 877 in 2017, 939 in 2018 and
1,087 in 2019. Last week, it forecast 880 in 2017, 956 in 2018
and 1,112 in 2019.
    That compares with 866 oil and gas rigs so far in 2017, 509
in 2016 and 978 in 2015. Most rigs produce both oil and gas.
    Analysts at U.S. financial services firm Cowen & Co's
capital expenditure tracking was unchanged this week, showing
the 64 E&Ps it tracks planned to increase spending by an average
of 49 percent in 2017 from 2016.
    That expected 2017 spending increase followed an estimated
48 percent decline in 2016 and a 34 percent decline in 2015,
Cowen said.

 (Reporting by Scott DiSavino; Editing by Marguerita Choy)
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