Oil explorers idled rigs in US fields for the 19th straight week, prolonging an unprecedented retrenchment in drilling.
Rigs targeting oil in the U.S. declined by 26 to 734, Baker Hughes Inc. said on its website Friday, a four-year low. Those seeking gas slipped by eight to 217, the Houston-based field services company said. The total U.S. count, which includes three miscellaneous rigs, fell by 34 to 954, the fewest since 2009.
The six-month retreat in oil drilling is bringing the U.S. shale boom to a halt, with crude production falling twice in three weeks and the government projecting a decline in output from tight-rock formations next month. The country has lost more than half of its oil rigs since October as drillers cut spending and let go of thousands of workers following the worst collapse in prices since 2009.
The spending curbs “are starting to impact supply in both North America and internationally, and supply is expected to tighten further in the second half of the year,” Schlumberger Ltd. Chairman and Chief Executive Officer Paal Kibsgaard said in a statement on Thursday. “A recovery in activity will fall well short of reaching previous levels.”
The U.S. benchmark West Texas Intermediate oil for May delivery declined 67 cents to $56.04 a barrel at 1:12 p.m. on the New York Mercantile Exchange, down 48 percent from the 52- week high of $107.73 reached June 20.
PRODUCTION SLIPS
U.S. oil production fell 20,000 barrels a day to 9.38 million in the week ended April 10, erasing an 18,000-barrel gain in the seven days prior, Energy Information Administration data show. The agency said in an April 13 report that output from tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May.
“If that pace is maintained for a year, U.S. oil production would fall by over a million barrels a day in 12 months,” James Williams, president of energy consulting company WTRG Economics, said in an e-mailed report on Thursday. “The bottom line is that the Saudi policy is working.”
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil, has resisted calls to curb production since deciding in November to maintain output levels. Saudi Arabia pumped close to a record amount of crude oil in March, leading the biggest surge in OPEC output in almost four years, the International Energy Agency said.
DECLINE FORECAST
Shale producers including ConocoPhillips and EOG Resources Inc. have predicted U.S. production will start declining before the end of the year. Goldman Sachs Group Inc. said last week that U.S. production is showing signs of peaking, and Standard Chartered Plc said April 13 that shale output is already falling and that declines will exceed 70,000 barrels a day in June.
Schlumberger reported a 19 percent revenue drop in the first quarter because of what Kibsgaard described as “the severe decline” in North America land drilling that occurred more abruptly than the company anticipated.
“A recovery in U.S. land drilling activity will be pushed out in time,” he said, “as the inventory of uncompleted wells builds and as the re-fracturing market expands.”
–With assistance from Jessica Summers and Eliot Caroom in New York, Grant Smith in London and Bradley Olson in Houston.
Bloomberg