(Bloomberg) -- Oil explorers shut down more rigs in U.S. fields to finish out the worst year for drilling cutbacks in almost three decades.
Rigs targeting crude in the U.S. fell by 2 to 536 in the past week, Baker Hughes Inc. said on its website Thursday. Natural gas rigs were unchanged at 162, bringing the total of working rigs to 698. Drillers searching for oil idled 59 percent of their rig fleet this year, the steepest annual cut since at least 1988.
The downward slide in working rigs probably will continue into the new year, crimping output from shale fields by at least 400,000 barrels a day, Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, said in a Dec. 28 report. Rigs designed to drill straight down into traditional fields have been hit harder than those capable of boring sideways through shale, Baker Hughes’ data showed.
Vertical rigs are taking a bigger hit “as lower oil prices pressure development of legacy fields, mainly in Texas,” the analysts wrote.
Two-thirds of oil rigs in the U.S. have been parked since drilling peaked in October 2014. Growing supplies of crude outpaced demand, deflating prices below $40 a barrel and forcing severe spending cutbacks throughout the industry. U.S. crude dipped below $35 -- its lowest price in 11 1/2 years -- earlier this month.
U.S. oil production fell to a low this year of 9.1 million barrels a day with the decline in drilling, but rose to 9.2 million as of Dec. 25.
Nationwide crude stockpiles rose by 2.63 million barrels last week, swelling inventories almost 130 million barrels above the five-year seasonal average. A 2.5 million-barrel decline had been projected in a Bloomberg survey of industry analysts. Supplies at Cushing, Oklahoma, the biggest U.S. oil storage hub, climbed to a record.
Demand for the costliest rigs -- those searching in deep seas for crude -- is at its lowest since a 2010 federal moratorium that shut most Gulf of Mexico exploration after the oil spill disaster at BP Plc’s Macondo well.
--With assistance from Mark Shenk.
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Copyright 2017 Bloomberg News.
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