More signs of that US oil production is heading lower – but it will take time. Data out on Friday showed the number of active US rigs drilling for oil has fallen for a seventh week in a row, according to the latest data from Baker Hughes.
On Friday, the firm said the number of rigs fell by another 53 to 325 by Friday.
That’s the lowest for years and down more than 55% in the past year from 867 rigs a year ago.
The number of rigs has now fallen by nearly 240 in five weeks.
The number of gas rigs has also fallen by more than 55 in the past year – from 183 to 81 last Friday.
The continuing fall in US production is underway – according to the Energy Information Administration (EIA) will accelerate following decisions by Exxon Mobil Corp and Chevron Corp which revealed they were slashing output on Friday.
The top two US producers plan for combined global shut-ins of 800,000 barrels a day in response to plunging crude prices and fuel demand.
That was a day after ConocoPhillips lifted its cut to 420,000 tonnes a day (for June at least) from the 200,000 a day announced in mid-April.
Both companies outlined deep cuts in investments in the Permian shale basin, America’s major oil field where growth in recent years made America the world’s top oil producer.
They each announced global shut-ins of up to 400,000 barrels per day (BPD) this quarter due to lockdowns to fight the coronavirus pandemic.
The two companies have spent heavily in the last two years to expand in the Permian basin in western Texas and eastern New Mexico.
Exxon said it will sideline 75% of its Permian drilling rigs, keeping 15 working.
The company posted a $US610 million first-quarter loss, its first quarterly loss in three decades, on a nearly $US3 billion inventory write-down reflecting lower margins and prices.
Chevron posted a $US3.6 billion profit on asset sales and improved refining results and also said it would further reduce spending this year. It took a $US11 billion write down in the 4th quarter.
Both companies said they will slash spending budgets by 30% this year. Chevron cut its capital spending budget to $US14 billion and Exxon to a still large $US23 billion, the lowest in four years.
All this holds promise for the path of US oil prices in coming weeks.
Friday saw West Texas Intermediate (WTI) crude futures end higher for a rare weekly gain.
West Texas Intermediate crude for June delivery on Nymex in New York rose 94 cents, or 5%, to settle at $US19.78 a barrel.
It ended with a 16.8% weekly rise. WTI had bounced 52% higher on Thursday and Friday but still suffered an 8% decline in April and is down almost 68% year to date.
The global benchmark July Brent crude settled at $US26.44 a barrel in Europe, down 4 cents, or nearly 0.2%. For the week it was up 6.6%.
Comex gold futures rose back over the key $US1,700-an-ounce mark on Friday as renewed concerns over the coronavirus pandemic and its effects on the global economy sparked safe-haven demand for the metal.
But it wasn’t enough to push prices higher for the week.
Traders ignored another weak reading from the American economy – the latest survey of manufacturing activity fell to 41.5% last month from 49.1% in March. This was the lowest since April 2009.
Comex gold for June delivery rose $US6.70, or 0.4%, to settle at $US1,700.90 an ounce, after losing 1.1% on Thursday.
That still left gold down 2% for the week after ending up 6% for April, according to FactSet data.
Comex July silver futures lost 3.5 cents, or 0.2%, at $US14.938 an ounce, following a climb of 5.8% in April. For the week, prices were down over 2%.
Other metals fell, with July copper down 1.4% at $US2.312 a pound, down 1.1% for the week.
Iron ore trading was on holiday on Friday – the price of 62% Fe fines delivered to northern China ended at $US84.04 on Thursday (Friday was trhe Mayday holiday), down from $US84.35 the previous Friday.
