On Friday, energy services company Baker Hughes Co. said that US energy companies cut the most oil rigs in a week since April 2015 as global oil demand is dented by the coronavirus pandemic, forcing many companies to curb investments.
In the week ended March 27, drillers cut 40 oil rigs to 624, the lowest level since March 2017. Year-on-year, the cut means a fall of 24% in the count. Year-to-date, the total number of active oil and gas rigs in the US was averaged at 785.
The Permian Basin posted 23 units shutdown to 382 last week, the lowest since November 2017 and the biggest weekly drop since March 2015.
In March, the oil rig count slumped by 54 units, the biggest monthly decline since February 2016. The fall was the second time in three months.
The International Energy Agency (IEA) estimated oil demand to fall by around 20% as 3 billion people are in lockdowns to limit the spread of coronavirus globally.
Many exploration and production (E&P) companies are forecast to cut capital expenditures (CAPEX) even more now as US crude was expected to trade at around USD29/barrel on average this year and at USD35/barrel in 2021, down from the average of USD57.04 last year.
According to US financial services company Cowen & Co., since the failed OPEC+ oil output cut agreement, 28 of E&P companies it tracks have curbed spendings and implied a 37% year-on-year decline in CAPEX this year.
Before the OPEC+ pact crumpled, Cowen estimated independent E&Ps to only cut spendings by an average of 11% this year from last year’s levels.
Simmons Energy analysts cut their prediction for the total US oil and gas rigs to an average of 528 this year, 215 in 2021, and 221 in 2022, from 943 in 2019. Previously, the energy specialist forecast the total rig count average for 2020 to be at 816 and 2021 at 848.
