U.S. energy firms cut 26 oil rigs in the latest week, the biggest reduction since April and the fifth straight weekly decline, data showed on Friday, a sign low prices were pushing drillers away from the well pad. The cutback for the week ended Oct. 2 brought the total rig count down to 614, the least since August, 2010. In the previous four weeks, drillers cut a total of 35 rigs, oil services company Baker Hughes Inc said in its closely followed report. U.S. crude prices rose 1.5 percent in the minutes after the report.
The latest rig count is less than half the 1,591 oil rigs in the same week a year ago and also far below the all-time high of 1,609 in October 2014. They have erased the 47 oil rigs energy firms added in July and August. The summertime additions came when U.S. crude was priced around $60 a barrel. This week, U.S. oil averaged $45 a barrel, the same as during the month of September, on continued worries about lackluster global demand and oversupply.
U.S. crude futures jumped after Baker Hughes released the report on expectations of reduced crude production in the months ahead. Crude prices had been flat just before the report. Baker Hughes also reported a reduction in natural gas rigs, bringing total U.S. rigs were to a 13-year low. Natural gas rigs were down two this week to 195, the lowest level in at least 28 years, according to the Baker Hughes data going back to 1987.
Drillers reduced the number of oil wells in all the major U.S. shale basins this week. Seven were cut in the Permian in West Texas and eastern New Mexico; five in the Eagle Ford in South Texas; two in the Niobrara in Colorado and Wyoming; and one in the Bakken in North Dakota and Montana. Analysts at Simmons & Co International, an investment banking services firm, said in a note they expect oil and gas rig counts to decline in the fourth quarter of 2015 with the rate of decline stabilizing in the first half of 2016.
Despite drilling cutbacks, U.S. oil production edged up to 9.4 million barrels per day (bpd) in July from 9.3 million bpd in June, according to the latest U.S. Energy Information Administration’s (EIA) 914 production report.