Jan 22 (Reuters) - U.S. energy firms this week cut oil rigs for a ninth week in the last ten, data showed on Friday, and were expected to shed more in coming weeks due to a recent collapse in crude prices to the lowest levels since 2003.
Drillers removed five oil rigs in the week ended Jan. 22, bringing the total rig count down to 510, the least since April 2010, oil services company Baker Hughes Inc said in its closely followed report.
That compares with 1,317 oil rigs operating in same week a year ago. In 2015, drillers cut on average 18 rigs per week for a total of 963 oil rigs for the year, the biggest annual decline since at least 1988.
U.S. crude oil futures soared over 7 percent on Friday as a cold snap boosted demand for heating oil and investors took advantage of the lowest prices since 2003 to close out some of their more profitable bets on price declines.
Despite the gains, U.S. crude was still down about 15 percent since the start of the year due to a persistent glut and weak demand.
Front-month U.S. crude futures were trading around $31 a barrel on Friday, but were fetching $35 on average for the rest of 2016 and nearly $40 for 2017.
As energy firms reduce capital spending plans for 2016 due to the collapse in crude prices, analysts forecast drillers would be slower than previously expected to return to the well pad later this year.
"We continue to believe the rig count during the first quarter will represent the bottom, but now model slower growth for the remainder of 2016," analysts at Evercore ISI, an investment banking advisory firm, said in a note.
Despite its forecast for slower growth, however, Evercore said it expects the total number of U.S. natural gas and oil rigs to rise each quarter for the rest of the year after bottoming in the first quarter.
Evercore warned it could reduce its rig count forecast further as the decline in oil prices and recent guidance from exploration and production companies points to bigger capital spending cuts.
"We would not be surprised to see U.S. spending fall 40 percent to 50 percent in 2016," Evercore said, noting its initial survey of exploration and production companies pointed to a spending decline of 30 percent in 2016.
Southwestern Energy Co, an independent oil and gas company based in Houston, this week said it would lay off 1,100 employees or nearly 40 percent of its workforce, as it slows drilling activity in response to the prolonged slump in oil prices.
General Electric Co on Friday reported an 8 percent drop in fourth quarter earnings in its industrial businesses due to weakness in divisions catering to the oil and gas sector.
Those spending cuts are having and impact on production. U.S. crude oil production averaged about 9.4 million barrels per day in 2015 and was forecast to average 8.7 million bpd in 2016 and 8.5 million bpd in 2017, according to the U.S. Energy Information Administration's latest Short-Term Energy Outlook.
(Reporting by Scott DiSavino; Editing by Marguerita Choy)
Copyright 2016 Thomson Reuters. Click for Restrictions.
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles
From the Career Center
Jobs that may interest you