Oil explorers idled rigs in US fields for the 21st straight week, extending an unprecedented retreat in drilling that has curbed domestic output and helped crude prices rally.
Rigs targeting oil in the US declined by 24 to 679, Baker Hughes Inc. said on its website Friday, the lowest level since September 2010. Texas’s Eagle Ford formation lost the most, dropping seven to 91, the Houston-based field services company said.
The Williston Basin, home of North Dakota’s prolific Bakken shale, added a rig for the first time in five months.
US energy producers have sidelined more than half of the country’s oil rigs since October, suspending production growth from the nation’s shale formations and helping end the rout in West Texas Intermediate oil prices that began last year.
Crude output has fallen three out of the last five weeks. WTI futures capped their biggest monthly advance since 2009.
“If you continue to see these rig counts decline and wells not being completed, you could be losing something like 70,000 to 100,000 barrels a day every month by the end of this year,” Scott Treadwell, a TD Securities Inc. research analyst, said during a conference in Calgary.
“That will put a floor on WTI very quickly and the discussion when we’re short of production won’t be about storage volumes getting full. It will be about storage volumes getting emptied.”
The US benchmark West Texas Intermediate oil for June delivery dropped 48 cents to settle at $59.15 a barrel on the New York Mercantile Exchange. Prices advanced 25 percent in April, the biggest monthly gain since May 20.
Domestic oil production averaged 9.37 million barrels a day in the week ended April 24, down from the record 9.42 million reached in March, US Energy Information Administration data show. Stockpiles at Cushing, Oklahoma, the biggest US storage hub, shrank for the first time since November.
“In our view, there is no doubt that US output is falling, and that the pace of decline is likely to accelerate in coming months,” Standard Chartered Plc analysts including Nicholas Snowdon, said in a research note April 27.
The number of oil rigs drilling in US shale plays would have to rise by 200 just to stabilize output, Snowdon said. “This is unlikely to happen this year,” he said.
US oil drilling is subsiding as the Organization of Petroleum Exporting Countries, which accounts for about 40 percent of the world’s oil, resists calls to curb output.
OPEC members pumped 31.295 million a day in April, near the highest level since November 2012, according to a Bloomberg survey of oil companies, producers and analysts.
While US output may decline between the second and third quarters, Goldman Sachs Group Inc. projected on April 26 that production in the fourth will still be 200,000 barrels a day above year-earlier levels.
And that’s not including the backlog of uncompleted wells that drillers may start bringing online, the bank said.
“We see risk to our production modeling as skewed to the upside later this year,” Goldman said in a research note. “A rapid drawdown of the observed backlog of uncompleted wells could lead to higher production later this year and in 2016.”
The Williston because the first of the major U.S. oil plays to add a rig since drilling began collapsing across the country. The basin rose by one to 80 this week, Baker Hughes said.
The US total may rebound to as high as 1,300 rigs should oil trade in the mid-$70s, Allen Gilmer, chief executive officer of the Austin-based energy data provider Drillinginfo, said by phone on Friday. The count will bottom in about a month, he said.
Whiting Petroleum Corp., the biggest oil producer in North Dakota’s Bakken shale, will put rigs back to work when oil prices rebound to $70 a barrel, James Volker, the company’s chief executive officer, said in a conference call with analysts on Thursday.
“Some of the rigs that we’ve released,” he said, “we can get back and pick up quickly.”