US Drillers Add Rigs

U.S. energy firms this week increased the number of oil rigs operating for the first time this year but the rig count in January fell the most in a month since April 2016, as the boom in the Permian, the nation's biggest shale oil formation, cools.

Companies added 10 oil rigs in the week to Jan. 25, bringing the total count to 862, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.

For the month, drillers cut 23 rigs in January, the most removed in a month since April 2016. Over the past two months, they pulled two rigs in December and added 12 in November.

The U.S. rig count, an early indicator of future output, is still much higher than a year ago when 759 rigs were active after energy companies boosted spending in 2018 to capture higher prices that year.

In 2019, however, drillers have said they plan to remove rigs due in part to forecasts for lower crude prices than last year.

U.S. oil output from seven major shale formations is expected to rise to a record high 8.2 million barrels per day in February, according to U.S. Energy Information Administration (EIA) projections this week.

But the EIA said it expects the increase in Permian production for February to be the smallest in a month since May 2018, when output fell slightly.

Output from the Permian has come under pressure in recent months as oil prices crashed and a production surge there outpaced pipeline capacity, trapping barrels in the region.

The U.S. shale boom is set to cool this year, according to Reuters columnist John Kemp. A decline in prices late last year, which usually takes three-four months to impact drilling, will likely start to slow production growth during the second half of 2019.

U.S. crude futures were trading below $54 a barrel on Friday, putting the front-month on track to slip for the first week in four as surging U.S. fuel stocks and global economic woes weighed on the market.

Looking ahead, crude futures were trading below $55 a barrel for the balance of 2019 and calendar 2020.

U.S. financial services firm Cowen & Co this week said the exploration and production (E&P) companies it tracks have provided mixed guidance for 2019 after indicating they would spend about $88.7 billion in 2018, a 23 percent increase over the $72.2 billion spent in 2017.

There were 1,059 oil and natural gas rigs active in the United States this week, according to Baker Hughes. Most rigs produce both oil and gas.

Analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, this week forecast the average combined oil and gas rig count will fall from 1,032 in 2018 to 999 in 2019 before rising to 1,087 in 2020. That forecast has remained unchanged in the past two weeks.

(Reporting by Scott DiSavino Editing by Marguerita Choy)

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