U.S. energy firms cut oil rigs for a second week in a row, data showed on Friday, a sign the latest price declines may be causing some drillers to put on hold their recently announced plans to return to the well pad. Drillers removed 10 rigs in the week ended Sept. 11 and 13 rigs in the week ended Sept. 4, bringing the total rig count down to 652, after adding rigs in six of the past eight weeks, oil services company Baker Hughes Inc said in its closely followed report.
That was the biggest two-week decline since early May. Those additions since the start of July showed some drillers had followed through on plans to add rigs announced in May and June when U.S. crude futures averaged $60 a barrel.
U.S. oil prices this week, however, averaged $45 a barrel, down from an average of $47 last week. Earlier Friday, U.S. crude prices were down more than 2 percent after two banks, Goldman Sachs and Commerzbank, both slashed their crude forecasts, citing lingering oversupply concerns and worries over China’s economy. “The oil market is even more oversupplied than we had expected and we forecast this surplus to persist in 2016,” Goldman said in a note entitled “Lower for even longer.”
Drillers this week cut one oil rig in each of the four major U.S. shale oil basins: the Eagle Ford in South Texas, Niobrara in Colorado and Wyoming, Bakken in North Dakota and Montana, and Permian in West Texas and eastern New Mexico. In response to falling prices, U.S. oil production has declined over the past several weeks with current output down to about 9.1 million barrels per day last week from an average 9.6 million bpd from late May to mid July, the highest since the early 1970s, according to government data.
Those output reductions occurred months after U.S. energy firms slashed spending, cut thousands of jobs and idled around 60 percent of the record high 1,609 oil rigs that were active in October as prices collapsed from around $107 a barrel in June 2014 to under $44 in January on lackluster global demand and lingering oversupply concerns.