U.S. drillers this week cut oil rigs by the most in over two years even as record production has turned the United States into a net oil exporter for the first time in history.
Energy companies cut 10 oil rigs in the week to Dec. 7, the biggest weekly decline since May 2016, bringing the total count down to 877, Baker Hughes, a GE company (NYSE: BHGE) said in its weekly report.
More than half the total U.S. oil rigs are in the Permian Basin, the country’s biggest shale oil formation. Active units there declined by four this week to their lowest since early November.
The United States last week exported more crude and refined products than it imported for the first time on record, even as the Organization of the Petroleum Exporting Countries and its allies agreed to fresh output cuts to support prices amid a global glut of oil.
The U.S. rig count, an early indicator of future output, is higher than a year ago when 751 rigs were active because energy companies have spent more this year to ramp up production to capture higher prices.
U.S. crude futures were trading below $54 per barrel on Dec. 7, boosted by the OPEC-led production cuts of 1.2 million barrels per day (MMbbl/d), putting the front-month contract on track for its biggest weekly percentage gain since June.
Looking ahead, crude futures for calendar 2019 and 2020 were trading around $55 per barrel.
U.S. financial services firm Cowen & Co. this week said the E&P companies it tracks have provided guidance indicating a 23% increase this year in planned capital spending.
Cowen said the E&Ps it tracks expect to spend a total of $89.1 billion in 2018. That compares with projected spending of $72.2 billion in 2017. Cowen said early 2019 capital spending budgets were mixed.
Analysts at Simmons & Co., energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and natural gas rig count would rise from 876 in 2017 to 1,031 in 2018, 1,092 in 2019 and 1,227 in 2020.
Year-to-date, the total number of oil and gas rigs active in the United States has averaged 1,029. That keeps the total count for 2018 on track to be the highest since 2014, which averaged 1,862 rigs. Most rigs produce both oil and gas.
The U.S. government projected average annual U.S. production will rise to a record high 10.9 million bpd in 2018 and 12.1 MMbbl/d in 2019 from 9.4 MMbbl/d in 2017.
The current all-time U.S. annual output peak was in 1970 at 9.6 MMbbl/d, according to federal energy data.