U.S. drillers pulled 94 oil rigs out of fields in a single week, the biggest retreat to date, as crude prices capped the longest stretch of monthly declines since 2009.
The oil rig count dropped to a three-year low of 1,223, Baker Hughes Inc. said on its website Friday. It was the biggest weekly decline since the Houston-based oil-field services company began collecting the data in 1987. The Permian Basin of Texas and New Mexico, the country’s biggest oil field, was hit hardest, losing 25 rigs.
Drillers are parking rigs as a global collapse in oil prices prompts producers to curb spending, service contractors to fire thousands and at least one oil-rich county in California to declare a fiscal emergency. Banks including Societe Generale SA have said prices may fall below $40 a barrel as global supplies surge and OPEC resists calls to curb output.
“The risk is that we go into a $30- to $40-a-barrel range if the market is too impatient and doesn’t want to wait for lower rig counts and lower well completions,” Mike Wittner, head of oil research at Societe Generale, said by telephone from New York on Friday. “Then you start getting below operating costs.”
West Texas Intermediate for March delivery rose $3.71 on Friday to $48.24 a barrel on the New York Mercantile Exchange. Even with the gain the futures capped a seventh straight month of declines, dropping 9.4 percent in January.
“There’s a lot of debate right now about the duration of the current low oil prices,” Ryan Lance, ConocoPhillips’ chief executive officer, said in a conference call Jan. 29. “We’re assuming that they’ll stay low for 2015, and we’re taking decisive actions.”
ConocoPhillips, the third-largest U.S. energy producer, said on Jan. 29 that it was cutting its rig count in North Dakota’s prolific Bakken shale formation to three this year. On Friday, Chevron Corp. cut its drilling budget by the most in 12 years, suspended share buybacks and laid off workers. Drilling contractor Helmerich & Payne Inc. said it may cut 2,000 jobs after receiving 22 notices from clients terminating rig contracts early.
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil supplies, has meanwhile held its ground after agreeing in November to maintain output targets. Saudi Arabia, the group’s biggest producer, won’t “singlehandedly balance the market in a downturn,” Khalid Al-Falih, Saudi Arabian Oil Co.’s chief executive officer, said at a conference in Riyadh.
U.S. oil production has continued to climb, reaching 9.21 million barrels a day in the week ended Jan. 23, the most in weekly data since at least 1983, Energy Information Administration data show.
Continental Resources Inc., the largest leaseholder in North Dakota’s Bakken shale formation, can weather low oil prices “forever,” the company’s chief executive officer, Harold Hamm, said in an interview at the Argus Americas Crude Summit in Houston on Jan. 28. Prices will recover as early as the first half of this year as producers cut back, he said.
In Kern County, home to three-fourths of California’s oil production, leaders declared a fiscal emergency. The collapse in oil prices may cut the government’s property-tax collections by almost 15 percent in the year beginning July 1, according to Nancy Lawson, the assistant county administrative officer.
“We were looking quite positive before this happened,” Lawson said.
Natural gas rigs increased by three to 319 and one miscellaneous rig was added, bringing the total count down 90 to 1,543. Gas futures for March delivery fell 2.8 cents Friday to $2.691 per million British thermal units on the Nymex, the lowest settlement since September 2012.