Rigs seeking oil in U.S. fall to 8-month low, Baker Hughes says

12/29/2014

Rigs seeking oil in U.S. fall to 8-month low, Baker Hughes says

MOMING ZHOU

HOUSTON (Bloomberg) -- U.S. oil drillers, facing the lowest crude prices in five years and rising competition from suppliers abroad, reduced the number of rigs to an eight-month low.

Rigs targeting oil declined by 37 to 1,499 in the week ended Dec. 26, Baker Hughes Inc. said on its website. The number of oil rigs has slipped by 76 in three weeks. Those drilling for natural gas increased by two to 340, the Houston-based field services company said. The total count, which includes one miscellaneous rig, dropped 35 to 1,840, also an eight-month low.

The number of rigs targeting U.S. oil is down from a record 1,609 following a $55/bbl drop in global prices since June, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest in three decades. As the Organization of Petroleum Exporting Countries resists calls to cut output, U.S. producers including Continental Resources Inc. and ConocoPhillips plan to trim spending.

“We should see the rig count going down at least through the end of the first quarter as a reaction to the low oil prices,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, before the report. “By midyear, we should see measurable impacts on production.”

The international benchmark North Sea Brent oil and the U.S. counterpart West Texas Intermediate crude are both trading near their lowest levels since 2009. WTI futures fell as low as $52.90 on the New York Mercantile Exchange today, down more than half from the 2014 peak.

While the U.S. rig count has dropped, domestic production continues to surge, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show.

Domestic oil output climbed to 9.14 MMbpd in the week ended Dec. 12, the highest in weekly EIA data going back to 1983, according to government estimates. Production was 9.13 MMbpd in the seven days ended Dec. 19.

Natural gas futures rose 12.6 cents to $3.133 per million British thermal units on the Nymex, down 26% this year.

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