U.S. energy firms cut oil rigs for a 12th week in the last 13, data for the holiday-shortened week showed on Wednesday, a sign drillers were still waiting for higher prices before returning to the well pad. Drillers removed nine oil rigs in the week ended Nov. 25, bringing the total rig count down to 555, the least since June 2010, oil services company Baker Hughes Inc said in its closely followed report.
Baker Hughes issued the report two days earlier than usual due to the U.S. Thanksgiving Day holiday. That decrease brings the total rig count to about a third of the 1,572 oil rigs operating in same week a year ago. Since the end of the summer, drillers have cut 111 oil rigs. U.S. oil futures averaged $42 a barrel so far this week, up from $41 last week, but was down about 1 percent so far on Wednesday as the dollar gained and investors focused on a deep global supply glut.
U.S. crude prices gained 20 cents after Baker Hughes issued the report, briefly pushing the front-month into positive territory, before quickly returning to near flat at $42.72 a barrel at 1:19 p.m. EST (1819 GMT).
Energy traders noted the rate of weekly oil rig reductions since the start of September, about nine on average, was much lower than the 18 rigs cut on average since the number of rigs peaked at 1,609 in October 2014, due in part to expectations of slightly higher prices in the future. U.S. crude futures for next year were trading around $47 a barrel, up from $45 last week, according to the full year 2016 calendar strip on the New York Mercantile Exchange.
Higher prices encourage drillers to add rigs. The most recent time crude prices were much higher than now was in May and June, when U.S. futures averaged $60 a barrel. In response to those higher prices, drillers added 47 rigs over the summer. Drillers cut rigs in all four of the major U.S. shale oil basins this week.
They removed five rigs in the Permian in West Texas and eastern New Mexico and one each in the Niobrara in Colorado and Wyoming, the Eagle Ford in South Texas and the Bakken in North Dakota and Montana. This week’s removal of both oil and natural gas rigs – gas rigs were down four – brought the total rig count down to a fresh 13-year low.