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Oil Plunge Has U.S. Output Rising by Least in Nine Months

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Oil production from the seven most prolific U.S. fields will expand in February by the slowest rate in nine months as drillers cut spending in response to the lowest crude prices in 5 1/2 years, a U.S. government forecast shows.

The seven regions, which account for 95 percent of the nation’s supply growth, will produce 5.52 million barrels a day, up 103,000 barrels from a month ago, the Energy Information Administration said in its drilling productivity report yesterday. That’s an increase of 1.9 percent, the least since May. Output gained 3.4 percent in February last year and rose 4 percent in 2013.

U.S. production growth is slowing as the collapse in oil prices prompts the country’s crude explorers to scale back capital budgets and idle the most drilling rigs in more than two decades. Escalating competition from global suppliers including the Organization of Petroleum Exporting Countries threatens to halt the shale-drilling boom that propelled U.S. output to the highest level since at least 1983.

“It’s a data point you have to give weight to after the rig count saw the sharpest drop since 1991,” Thomas Finlon, the Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone yesterday. “These are the early signs that production might start to crest if not start to fall.”

West Texas Intermediate, the U.S. benchmark crude, declined $2.29 to $46.07 a barrel on the New York Mercantile Exchange yesterday, the lowest close since April 2009. The contract for February delivery extended losses today, sliding to $45.27 in electronic trading at 12:30 p.m. Singapore time.

Bakken, Permian

Production growth in North Dakota’s Bakken formation will slow to 1.86 percent in February, reaching 1.31 million barrels a day, the EIA’s report shows. The Permian Basin of Texas and New Mexico, the largest U.S. oil field, is expected to expand by 2.2 percent to 1.93 million barrels a day.

Output in Texas’s Eagle Ford formation will rise 1.5 percent to 1.72 million barrels a day, down from a 1.8 percent gain in January, according to the report.

U.S. oil drillers pulled 61 rigs out of fields last week, the most since February 1991, which also followed a slump in prices before the start of the Persian Gulf War, data compiled by Baker Hughes Inc. show.

Drilling has dropped off so quickly that monthly U.S. oil production will probably start decreasing by the end of the first half of 2015, according to Standard Chartered Plc. The rate of decline in the third quarter will be “severe” should prices remain low, analysts including Nicholas Snowdon in London said in a report yesterday.

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