Decline in use of oil rigs with drop in oil prices

Decline in use of oil rigs with drop in oil prices

Fall in oil prices below $55 a barrel is the lowest level in five years. The fall in oil prices has led US oil drillers to stop using the most rigs since 2012. According to website of Baker Hughes, the rigs targeting oil decreased by 37 to 1,499 in the week which ended on December 26, the lowest since April and as per the Houston-based field services company. However, drilling for natural gas rose by two to 340.

US oil output has increased to the highest in three decades even as the Organization of Petroleum Exporting Countries opposes to decrease production to protect market share. Crude has sunk by about 50% this year, which led US producers such as Continental Resources Inc. and ConocoPhillips to prepare for spending cuts.

"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. By midyear, we should see measurable impacts on production", said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. The total number of rigs, which include one miscellaneous rig, decreased 35 to 1,840.

The international benchmark Brent and the US counterpart West Texas Intermediate crude are both performing near their lowest levels since 2009. WTI futures dropped 79 cents to $52.82 a barrel in electronic trading on the New York Mercantile Exchange and Brent fell $1.02 to $56.86.

Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan, said on phone that the rig count is decreasing as oil prices are falling and the margins just aren't there.

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