May 27, 2016 / 5:12 PM / 2 years ago

U.S. oil drillers cut rigs despite $50 crude -Baker Hughes

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, despite crude prices this week testing a
seven-month high at $50 a barrel.
    That is a key level that analysts and producers said would
trigger a return to the well pad.
    Drillers cut 2 oil rigs in the week to May 27, bringing the
total rig count down to 316, the lowest level since October 2009
and about half the 646 rigs 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 and 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

 (Reporting by Scott DiSavino; Editing by Marguerita Choy and
Chizu Nomiyama)
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