- Eagle Ford in South Texas drops by 3 rigs; Permian up by 4
- 10th straight decline in rigs still may not be enough
U.S. crude explorers pulled back drilling rigs for a 10th straight week as conviction grows that the worst oil downturn in decades is nearing its bottom.
Rigs targeting oil in the U.S. fell by 6 to 572, extending a five-year low after nearly 100 were idled since the start of September, Baker Hughes Inc. said on its website Friday. Natural gas rigs gained 2 to 199, bringing the total down by 4 to 771. The Eagle Ford Shale in south Texas, whose total rig count is down by 72 percent since the middle of 2012, was the only one of the four major U.S. basins to drop oil rigs this week. Three were let go there, bringing the active oil rig count down to 61.
Despite more than two straight months of idling oil rigs, the small decline each week likely means more pain is ahead, said James Williams, president of WTRG Economics in London, Arkansas.
"The fact that it was only six rigs might still be bearish for crude oil prices.," Williams said Friday in a phone interview. "Only six rigs doesn’t really indicate that you’ve had much of a drop in production."
Oil is near a bottom and demand is poised to close the gap with global supplies as investments in new production decline and consumption grows, according to Pulitzer Prize-winning author Daniel Yergin. U.S. crude output, which surged to the most in more than three decades this year, deepening a collapse in prices, will retreat by about 10 percent in the 12-months ending in April, according to Yergin, vice chairman at IHS Inc.
"We are in the bottom part of the cycle and a year from now the market will be looking different," Yergin said. "These prices are having such a big impact on investment."
Despite the cutbacks, supplies haven’t yet followed suit as new techniques that increase efficiency keep production flowing. Output rose by 48,000 barrels a day last week to 9.2 million barrels, according to weekly Energy Information Administration data.
The holiday season in the U.S. isn’t expected to be merry for the oil industry, Williams said.
"Are we going to have Thankgiving layoffs?" Williams said. "Here’s the turkey and your pink slip."
America’s oil drillers have idled more than half the country’s rigs since last October as the world’s largest crude suppliers battle for market share. The crude being pumped out of U.S. shale formations helped create a global glut that’s pushed prices down by more than 50 percent since June 2014.
West Texas Intermediate, the U.S. benchmark crude, fell 1.6 percent to $44.49 a barrel at 1:16 p.m. on the New York Mercantile Exchange. WTI has been trading between $44 and $50 since September.
Global oil supply and demand will begin to move into balance by late 2016 or 2017 and prices may rise to $70 to $80 a barrel by the end of the decade, Yergin said.