U.S. energy firms this week reduced the number of oil rigs operating for a third week in a row as producers cut spending on new drilling, even though most are still increasing output as they benefit from efficiency gains.Drillers cut seven oil rigs in the week to Nov. 8, bringing the total count down to 684, the lowest since April 2017, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
In the same week a year ago, there were 886 active rigs.
The oil rig count, an early indicator of future output, has declined for a record 11 months in a row as independent exploration and production companies cut spending on new drilling as shareholders seek better returns in a low price environment.
Oil output, however, has continued to increase in part because productivity of those remaining rigs – the amount of oil new wells produce per rig – has increased to record levels in most U.S. shale basins.
Devon Energy Corp , which has been shedding assets in a bid to become a pure-play U.S. oil producer, on Tuesday raised its full-year oil output forecast, as it kept a check on expenses, which fell 23.9% to $1.65 billion.
Shale producer EOG Resources Inc topped its third-quarter oil production targets but pared its 2019 capital spending plan.
The U.S. Energy Information Administration projected U.S. crude output will rise to 12.3 million barrels per day (bpd) in 2019 from a record 11.0 million bpd in 2018.
That output growth, however, is headed for a “major slowdown” as capital discipline and weak prices play out, according to a study by consulting firm IHS Markit.
IHS Markit forecast total U.S. production growth would be 440,000 bpd in 2020 before essentially flattening out in 2021. Modest growth is expected to resume in 2022.
“Going from nearly 2 million bpd annual growth in 2018, an all-time global record, to essentially no growth by 2021 makes it pretty clear that this is a new era of moderation for shale producers,” Raoul LeBlanc, vice president for North American uncoventionals at IHS Markit, said in a release.
Pioneer Natural Resources Co’s chief executive said he expects the Permian Basin, the largest U.S. oilfield, to “slow down significantly over the next several years.”
“I don’t think OPEC has to worry that much more about U.S. shale growth long term,” CEO Scott Sheffield said on Tuesday on a call with analysts.
Record U.S. production has prompted the Organization of the Petroleum Exporting Countries to cut supplies to try to keep global prices stable.
OPEC on Tuesday said it would supply a diminishing amount of oil in the next five years as output of U.S. shale and other rival sources expanded.
OPEC expects supply of U.S. oil to reach 16.9 million bpd in 2024 from 12.0 million bpd in 2019, although the expansion will slow and peak at 17.4 million bpd in 2029.
U.S. crude futures traded around $57 per barrel on Friday , while they were around $55 in calendar 2020 and $52 in calendar 2021 .
U.S. financial services firm Cowen & Co this week said 17 of the exploration and production companies it watches reported spending estimates for 2020.
Cowen said there were 14 decreases and three increases, implying a 15% decline in 2020, which puts spending on track to decline for a second year in a row.
Cowen has said producers expect to spend about $80.5 billion in 2019 versus $84.6 billion in 2018.
Occidental Petroleum Corp said on Monday it would slash spending on big projects by 40% next year to pay down debt. In the Permian Basin, spending will drop by half to $2.2 billion, and by a third in Colorado’s shale fields.