Rigs targeting oil in the US dropped by 13 last week after crude futures traded below $80 a barrel for the third time in a month.
Rigs drilling for crude declined to 1,582, Baker Hughes Inc. said. Gas rigs were up 14 to 346, data posted on the Houston-based field services company’s website show. Miscellaneous rigs rose by one to one.
US benchmark West Texas Intermediate crude has tumbled by more than $20 a barrel in the last four months amid the highest domestic oil production levels since the 1980s. The slide in prices threatens to slow a drilling boom in US shale formations that has helped drive down prices at the pump to the lowest levels since 2010 and shrink the nation’s dependence on foreign oil imports.
“We’re seeing the impact of lower crude oil prices,” James Williams, president of WTRG Economics in London, Arkansas, said. “Nobody’s going to drill to break even. I’m expecting us to be below 1,500 oil rigs by the end of the year.”
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US benchmark West Texas Intermediate crude for December fell 58 cents to settle at $80.54 a barrel on the New York Mercantile Exchange, down 18 percent in the past year. The contract traded as low as $79.55. As much as half of shale oil is uneconomic at current prices, according to OPEC Secretary-General Abdalla el-Badri.
New York-based Sanford C. Bernstein & Co. estimates about a third of US production from shale loses money at $80 a barrel.
ConocoPhillips plans to scale back drilling in emerging oil regions such as West Texas and the Rocky Mountains, chairman/CEO Ryan Lance told investors last week. The Permian Basin of West Texas and New Mexico, the biggest onshore US crude play, lost the most oil rigs, dropping by seven to 555.
“The Permian is on the high end of the cost range, so it makes sense that it’s showing up with the greatest drop in oil rigs,” Williams said.
US oil production rose 36,000 barrels a day, or 0.4 percent, in the week ended October 24 to 8.97 million, the highest level in at least three decades, Energy Information Administration data show. Crude supplies gained by 2.06 million barrels to 379.7 million.
Natural gas for December delivery settled at $3.873 per million British thermal units on the Nymex, up 8.2 percent in the past year.
