U.S. energy firms this week cut oil rigs for a 12th week in a row to the lowest level since December 2009 as drillers continue to slash capital expenditures despite crude prices having apparently bottomed, data showed on Friday.
Looking forward, many analysts think the rig count will rebound later this year when prices rise.
Drillers removed six oil rigs in the week ended March 11, bringing the total rig count down to 386, oil services company Baker Hughes Inc said.
That compares with 866 oil rigs operating in the same week a year ago. Drillers started to steadily reduce their rig count after crude prices began to collapse mid-2014.
U.S. crude futures were trading just under $39 a barrel, up 8 percent on the week and set for its fourth weekly gain on forecasts of tighter supplies as U.S. and non-OPEC crude output was beginning to fall faster than previously expected.
After falling as low as $26.05 a barrel last month, its lowest level since 2003, U.S. crude has rebounded and was around $42 for the balance of 2016 and $45 for calendar 2017.
Chevron Corp said this week it will add two rigs in the oil-rich Permian shale of West Texas in 2016, part of a bet that crude prices will rise this year.
Other producers, however, are still reducing rigs due to the crude oil price rout.
In Alaska, BP Plc said it will cut the number of rigs operating in its Prudhoe Bay field from five to two and cut more than 200 contracting jobs.
In an effort to extend the life of existing wells, some drillers are investing in new technologies, like choking and lifting, to keep their wells producing oil and natural gas for longer.
Those efforts however were not expected to boost U.S. oil output over the next two years, only slow the rate of decline.
U.S. oil production was expected to fall from 9.4 million barrels per day in 2015 to 8.7 million bpd in 2016 and 8.2 million bpd in 2017, according to the federal estimates this week.
Analysts at Morgan Stanley this week forecast North American exploration and production companies would cut spending on oil and natural gas rigs by over 50 percent in 2016 versus 2015, before increasing spending by over 40 percent in 2017 versus 2016.
Analysts at Swiss bank UBS lowered their North American rig count expectations with activity in the first quarter to decline by 26 percent from the fourth quarter.
Analysts at Simmons & Co International forecast the overall U.S. gas and oil onshore rig count would fall around 10 rigs per week for the rest of the quarter.
Analysts at Evercore ISI forecast the gas and oil land rig count would fall by an even bigger 15 rigs per week for the rest of the quarter before holding mostly steady during the second quarter and rising in the second half of 2016, 2017 and 2018.
The total oil and gas rig count this week fell to 480, with 386 oil and 94 gas rigs, the lowest level since at least 1987. Gas rigs <RIG-GS-USA-BHI> were at their lowest level since at least 1987, according to the Baker Hughes records.
(Reporting by Scott DiSavino, Barani Krishnan; Editing by Marguerita Choy)