Rigs targeting oil in the U.S. fell by 9 to 605, adding to the 61 sidelined in the previous five weeks and extending a five-year low, Baker Hughes Inc. said on its website Friday. Rigs put aside in the Permian basin in West Texas led the decline.
“We were expecting a lot of the marginal vertical and directional rigs to start coming back out of the market, and that’s exactly what we saw this week,” Matt Marietta, an analyst at Stephens Inc. in Houston said. “Overall this is a trend I think is going to continue into year-end.”
America’s oil drillers have idled more than half the country’s rigs since last October as the world’s largest crude suppliers battle for market share. The crude being pumped out of U.S. shale formations helped create a global glut that’s pushed prices down by more than 50% since June 2014.
Efficiency
However, new techniques that increased efficiency have prevented production from falling into a tailspin. U.S. crude output rose by 76,000 bpd to 9.2 MMbpd last week, the biggest gain in nearly half a year, according to Energy Information Administration data. Production reached a four-decade high of 9.61 MMbopd in June.
Nationwide crude stockpiles rose 3.07 MMbbl to 461 MMbbl in the week ended Oct. 2, the EIA said. Supplies were forecast to have gained by 2.25 MMbbl last week, according to a Bloomberg survey.
Drillers in the Permian sidelined 10 oil rigs, reducing the count there to 230, Baker Hughes said. In the Eagle Ford shale formation, the number fell by 2 to 67.
West Texas Intermediate, the U.S. benchmark crude, rose 2 cents to $49.45 at 1:38 p.m. on the New York Mercantile Exchange. Oil prices have climbed by nearly a third since the last week of August.
Price gains have been driven by “hot money chasing headlines,” Ed Morse, the head of global commodity research at Citigroup Inc. in New York, said earlier this week in a television interview with Bloomberg Surveillance. Investors are mistakenly thinking that the falling U.S. rig count signals an immediate slide in output, he said.