US Oil Drillers Cut Rigs for First Week Since January - Baker Hughes

Reuters

June 30 (Reuters) - U.S. oil drillers cut rigs this week for the first time since January and the pace of additions slowed this quarter due to declines in crude prices despite an OPEC-led effort to cut production and end a multi-year supply glut.

Analysts, however, noted the weekly decline in the rig count was likely just a brief pause in a drilling recovery expected to continue through at least 2019.

Drillers cut two oil rigs in the week to June 30, bringing the total rig count down to 756, still more than double the 341 rigs in the same week a year ago, energy services firm Baker Hughes Inc said in its closely followed report on Friday.

That decline followed a record 23 consecutive weeks of rig additions, according to Baker Hughes data going back to 1987. Drillers have added rigs in 52 of the past 57 weeks since the start of June 2016.

The pace of those additions, however, has slowed over the past few months with the decline in oil prices.

In the second quarter, drillers added 94 rigs, which is less than the 137 added during the first quarter.

For the first half of the year, or since the Organization of the Petroleum Exporting Countries began to curb output, U.S. drillers added 231 rigs, up from 195 in the second half of 2016. During the first half of 2016, drillers removed 206 rigs.

Crude oil prices, however, were on track for their worst first-half performance since 1998.

Lingering worries about oversupply have knocked around 15 percent off U.S. crude futures so far this year, despite a deal involving OPEC members and some other major producers to curb production by about 1.8 million barrels per day (bpd).

U.S. crude futures on Friday were trading almost $46 per barrel, putting the front-month on track for its first gain in six weeks.

Analysts said those OPEC-led cuts were being frustrated by rising output from U.S. shale drillers and other producers hoping to capture higher oil prices in future months.

U.S. shale oil producers said they plan to keep drilling new wells despite this month's crude price drop but expect to revisit spending should pricing remain below $45 a barrel for several months.

Pioneer Natural Resources Chief Executive Tim Dove said newer operating efficiencies allow his company - one of the biggest operators in the Permian Basin, the largest U.S. oilfield - to continue to drill more.

But if prices were to remain depressed for a longer term, "we can pare away and still be a growth company even in a $45 environment," he said.


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