U.S. energy firms this week cut oil rigs for the first time in the three weeks as crude prices have fallen to their lowest in over a year.
Drillers cut three oil rigs in the week to Nov. 21, bringing the total count down to 885, General Electric Co.’s Baker Hughes energy services firm said in its closely followed report on Nov. 16.
After the rig additions stalled at five during the third quarter, drillers have added 22 rigs so far this quarter.
Baker Hughes released the weekly report two days early due to the U.S. Thanksgiving day holiday.
The U.S. rig count, an early indicator of future output, is higher than a year ago when 747 rigs were active because energy companies have spent more this year to ramp up production to capture prices that are higher in 2018 than 2017.
More than half the total U.S. oil rigs are in the Permian Basin, the country’s biggest shale oil formation. Active units there held steady this week at 493, the most since January 2015.
U.S. crude futures were trading above $55 a barrel on Nov. 21 after falling to their lowest since October 2017 earlier in the week on concerns the global market is oversupplied.
Looking ahead, crude futures for calendar 2019 and calendar 2020 were both trading below $56 a barrel.
U.S. financial services firm Cowen & Co this week said the exploration and production (E&P) companies it tracks have provided guidance indicating a 25 percent increase this year in planned capital spending.
Cowen said the E&Ps it tracks expect to spend a total of $90.0 billion in 2018. That compares with projected spending of $72.2 billion in 2017. Cowen said early 2019 capital spending budgets were mixed.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and natural gas rig count would rise from 876 in 2017 to 1,031 in 2018, 1,092 in 2019 and 1,227 in 2020.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,027. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.