Drillers sidelined rigs in U.S. oil fields for the first time in three weeks, resuming the steepest and most protracted decline in drilling on record.
Rigs targeting oil in the U.S. decreased by 7 to 638, Baker Hughes Inc. said on its website Friday. They rose by five last week. Natural gas rigs rose by 1 to 218 and miscellaneous rigs were unchanged at 1, bringing the total down by 6 to 857.
America’s oil drillers have sidelined more than half the country’s rigs since October as U.S. crude collapsed from its mid-2014 peak to less than $45 a barrel in March. After rebounding somewhat and staying near $60 for much of the second quarter, West Texas Intermediate has dropped 17 percent from June 23.
The latest rig-count decline was more of a “normal churn” when operators look to get more bang for their buck by letting go of less-efficient drilling rigs, Matt Marrietta, an analyst at Stephens Inc. in Houston, said in a phone interview.
“It’s too soon to suspect these rigs coming out of the market are in response to the decline that we’ve had in the commodity price,” he said of the most recent drop.
The crude being pumped out of shale formations has helped create a global glut that drove prices down 49 percent in the second half of 2014. WTI for August delivery slipped 20 cents to $50.71 a barrel at 2:15 p.m. on the New York Mercantile Exchange.
The biggest rig decline among the large plays occurred in the Eagle Ford of South Texas, where four rigs were idled, bringing the region’s total to 77. The Williston of North Dakota saw a drop of two rigs to 69.
“The reduction in oil price puts a pause on some of the customer activity plans for the second half of the year,” Jeff Tillery, an analyst at Tudor Pickering Holt & Co. in Houston, said in a phone interview before the numbers were announced. “We still think we’re basically at bottom, but the question is, have we just muted the timing of the recovery for a little while?”
Traders have been tracking the rig counts as they try to determine when U.S. oil production will fall. Crude output in the U.S. tumbled 42,000 barrels a day to an eight-week low of 9.56 million in the seven days ended July 10, weekly Energy Information Administration data show.