US oil drillers, facing the lowest crude prices in five years and rising competition from suppliers abroad, idled the most rigs since 2012.
Rigs targeting oil declined by 37 to 1,499 in the week ended December 26, the lowest since April, Baker Hughes Inc said, extending the three-week decline to 76.
Those drilling for natural gas increased by two to 340, the Houston-based field services company said. The total rig count, which includes one miscellaneous rig, dropped 35 to 1,840, also an eight-month low.
The number of rigs targeting US oil is down from a record 1,609 following a $55-a-barrel drop in global prices since June, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest in three decades.
As the Organization of Petroleum Exporting Countries resists calls to cut output, US producers including Continental Resources Inc. and ConocoPhillips plan to trim spending.
“We should see the rig count going down at least through the end of the first quarter as a reaction to the low oil prices,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas, before the report. “By midyear, we should see measurable impacts on production.”
The international benchmark North Sea Brent oil and the US counterpart West Texas Intermediate crude are both trading at their lowest levels since 2009.
WTI futures fell as low as $52.90 on the New York Mercantile Exchange today, down more than half from the 2014 peak. Brent dropped to $57.37.
“The rig count is falling because oil prices are falling,” Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan, said by phone. “The margins just aren’t there.”
While the US rig count has dropped, domestic production continues to surge, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show.
Domestic oil output climbed to 9.14 million barrels a day in the week ended Dec. 12, the highest in weekly EIA data going back to 1983, according to government estimates. Production was 9.13 million in the seven days ended December 19.
Oil rigs dropped by five to 527 in the Permian Basin in Texas and New Mexico, by three to 188 in the Eagle Ford of Texas and by two to 178 in the Williston of North Dakota, Baker Hughes said. In basins outside the 14 majors listed by Baker Hughes, oil rigs fell by 27 to 375.
Natural gas futures rose 16 cents to $3.167 per million British thermal units on the Nymex, down 25 percent this year.