US Oil Drillers Pull 13 Rigs, Biggest Drop in 4 Weeks

Energy firms pulled another 13 rigs from U.S. oil fields this week, the biggest drop in four weeks, data showed on Friday, showing that a near six-month slump in activity had yet to run its course despite a rebound in crude oil prices.

 

That was the 25th straight weekly decline, bringing the total rig count down to 646, the lowest since August 2010, oil services company Baker Hughes Inc said in its closely followed report.

 

However, in the Eagle Ford basin in South Texas, the nation's second biggest shale oil field, drillers added one oil rig in the third weekly increase in a row, bringing the total up to 90.

 

The market has been eyeing the U.S. rig count and the increases of a few rigs in some basins over the past few weeks ahead of next week's meeting of the Organization of the Petroleum Exporting Countries, which is to decide on crude production levels of its 12 members. OPEC is widely expected to keep its output levels unchanged to defend market share.

 

The Permian basin in western Texas and eastern New Mexico, the biggest and fastest growing U.S. shale oil play, meanwhile,  lost one oil rig to 231, the lowest since at least 2011, according to Baker Hughes data going back to 2011. At least three other shale formations also lost one rig each this week.

 

U.S. crude oil futures extended gains after the data, and were trading 4.8 percent higher at $60.45 by 1:38 p.m. (1738 GMT).

 

Since the number of oil rigs peaked at 1,609 in October, U.S. drillers have slashed spending, eliminated thousands of jobs and idled more than half of the country's active rigs as U.S. crude futures collapsed 60 percent from over $107 a barrel last June to a six-year low near $42 in March.

 

Since then, however, U.S. energy companies have started to return to the well pad as prices rebounded around 40 percent to over $60 earlier in May. Prices so far this week have averaged about $58 a barrel.

 

Drillers including Pioneer Natural Resources Co (PXD) and EOG Resources Inc have said in recent weeks they are preparing to step up drilling activity, citing the price rebound

 

Goldman Sachs this week, however, warned an increase in U.S. oil production could send prices spiraling back down to $45 a barrel later this year.

 

Last week, U.S. crude production jumped to 9.6 million barrels a day (bpd) from 9.3 million bpd in the prior week, its highest level since the early 1970s, according to government data.

 

Goldman forecast the crude market will remain oversupplied through 2016 with U.S. producers set to increase drilling again and Saudi Arabia, Iraq and Russia on track to grow production sharply.

 

"The longer this price decline takes to materialize, the greater the price downside given our already projected high inventories into 2016, especially in the United States," Goldman said in the report.