U.S. oil drillers idle more rigs as 2016 spending comes into focus

Explorers resumed parking rigs in U.S. oilfields as further spending cuts next year gain greater focus.

Rigs targeting oil in the U.S. fell by 3 to 538, extending a five-year low after more than 150 were idled since August, Baker Hughes said on its website Wednesday. It was the fifth time in six weeks that oil rigs declined, after a 17-rig addition last week.

Natural gas rigs were trimmed by 6 to 162, bringing the total down by 9 to 700. The Williston Basin in North Dakota led the weekly drop with 3 rigs parked, leaving 55 active there. There were five rigs active in the Barnett Shale.

“At the prices we’ve been seeing, you’re going to see oil rigs below 500 sometime in the first quarter,” said James Williams, president of WTRG Economics in London, Arkansas.

Crude prices recovered a bit more on Wednesday after falling to an 11-year low this week. West Texas Intermediate rose 3.4 percent to $37.37 a barrel at 1:55 p.m. on the New York Mercantile Exchange.

The worst is expected to hit sometime next year as explorers slash as much as another 30 percent in spending, forcing an additional 10 percent of rigs to be idled, Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, said in a Dec. 21 report. As a result, rig owners are likely to face challenges next year, especially with their earnings.

“The road to recovery may be more muted than many are anticipating,” the analysts wrote. “This is due to rig efficiency keeping utilization low, and, in turn, day rates.”

America’s oil drillers have idled more than half the country’s rigs in the past year 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 60 percent since June 2014.

This story was originally published December 23, 2015 at 3:43 PM with the headline "U.S. oil drillers idle more rigs as 2016 spending comes into focus."