02-02-2016, 10:21 PM
U.S. energy firms cut oil rigs for the sixth straight week, data showed on Friday, and were expected to shed more with major U.S. shale oil companies slashing spending plans after crude prices hit 12-year lows. Drillers removed 12 oil rigs in the week ended Jan. 29, bringing the rig count down to 498, the least since March 2010, oil services company Baker Hughes said. That compares with 1,223 rigs in same week a year ago. In 2015, drillers cut on average 18 rigs per week for a total of 963 oil rigs for the year, the biggest annual decline since at least 1988.
U.S. oil drillers cut rigs for sixth straight week: Baker Hughes
As oil prices continue to decline, North American E&P companies have hedged just 15% of their total production volumes for 2016, including 14% of oil and 18% of natural gas, leaving the companies largely exposed to current depressed market prices, according to new analysis from IHS. According to the IHS Energy Comparative Peer Group Analysis of North American E&Ps, production hedging for the group of 51 companies studied will fall even more significantly in 2017, when just 4% of total production will be hedged, including only 2% of oil and 7% of gas, IHS said.
Oil and gas companies face difficult year as hedging protections roll off: IHS
A new note from Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil move into a much bigger perspective, arguing that a sustained price plunge "will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history."
Looking further ahead, US crude production is expected to average 8.7 mbpd in 2016, down 700,000 bpd from 2015. Russian output will also slip, though more slowly, from its record levels, and the North Sea will slink back into decay. Still, OPEC looks to continue its onslaught, however disjointed. Saudi Arabia has no intention of cutting its vigorous production and Iran could flood the market with up to 750,000 additional bpd by the end of 2016 as international sanctions are stepped down.