U.S. energy companies this week cut oil rigs for the first time in seven weeks even as crude prices hovered near a three-year high, prompting more drillers to boost spending plans for 2018.
Drillers cut four oil rigs in the week to March 9, bringing the total count down to 796, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday. <RIG-OL-USA-BHI>
The U.S. rig count, an early indicator of future output, is much higher than a year ago when 617 rigs were active as energy companies have continued to boost spending since mid-2016 when crude prices began recovering from a two-year crash.
U.S. crude futures traded around $62 a barrel this week, close to levels hit in late January when prices rose to their highest since December 2014. That compares with averages of $50.85 in 2017 and $43.47 in 2016.
Looking ahead, futures were trading around $61 for the balance of 2018 and $57 for calendar 2019.
In anticipation of higher prices in 2018 than 2017, U.S. financial services firm Cowen & Co said 58 of the roughly 65 exploration and production (E&P) companies they track have already provided capital expenditure guidance indicating an 11 percent increase in planned spending over 2017.
Cowen said those E&Ps that have reported spending plans for 2018 expected to spend a total of $80.5 billion in 2018, up from an estimated $72.4 billion in 2017.
So far this year, the total number of oil and natural gas rigs active in the United States has averaged 959. That compares with an average of 876 rigs operating in 2017, 509 in 2016 and 978 in 2015. Most rigs produce both oil and gas.
For the year, EIA projected in March that total U.S. production will rise to a record high 10.7 million bpd in 2018 and 11.3 million bpd in 2019, up from 9.3 million bpd in 2017.
The current all-time U.S. output annual peak was in 1970 at 9.6 million bpd, according to federal energy data.
Reporting by Scott DiSavino