US Oil Drillers Cut Rigs as Crude Prices Collapse

U.S. energy firms cut a surprisingly sharp 13 oil rigs this week, the first drop in seven weeks, as a renewed slump in prices this summer forced drillers to make a second round of cut-backs.

 

The decline erases weeks of small gains and brings the total to the week ending Sept. 4 down to 662, the lowest since mid-July, oil services company Baker Hughes Inc said in its closely followed report on Friday.

 

"Clearly the precipitous drop in oil prices has hit capital expenditures for new drilling in the U.S. with today's Baker Hughes rig count numbers. With prices remaining at relatively low levels without much relief in sight, we are likely going to see further declines," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.

 

U.S. crude's front-month was down about 1 percent in early trading along with equities, but pared losses after the rig data, trading down 5 cents at $46.70 a barrel.

 

Drillers cut rigs in three of the four major U.S. shale oil basins, with a five-rig drop in the Eagle Ford in South Texas and two in the Permian in West Texas. Producers removed one rig in the Bakken and the count remained unchanged in the Niobrara in Colorado and Wyoming.

 

The decline comes the same week new government data showed the U.S. oil industry pumped less crude than initially estimated this year, evidence that drillers were scaling back production amid collapsing prices.

 

The revised June production data, released Monday, helped U.S. crude prices surge as much as $3 a barrel, but the rally was short lived.

 

The oil market shadowed Wall Street through most of this week, rising and falling in tandem with stock prices.

 

U.S. crude futures fell from a six-month high of $61.43 in June to $37.75 on Aug. 24, a 6-1/2-year low, due to oversupply worries and uninspiring demand growth.

 

The Energy Information Administration said its new survey-based output data showed the United States pumped a hair below 9.3 million barrels per day in June, down by 100,000 bpd from a revised May figure.

 

The June figure was also nearly 250,000 bpd below what the EIA had estimated a few weeks ago, highlighting the steep reversal in output as a five-year boom sours and suggesting to some analysts that a global glut might ease sooner than expected.