The number of rigs drilling for oil in the U.S. dropped by 37 last week to 1,019, the fewest since July 2011, data from Baker Hughes Inc. showed Feb. 20.
Since Dec. 5, a total of 556 have been taken out of service.
Oil explorers including Royal Dutch Shell Plc and Chevron Corp. have announced spending cuts of almost $50 billion since Nov. 1.
Transocean Ratings
Transocean Ltd., the world’s largest offshore driller, had its credit rating cut to junk Feb. 25 by Moody’s Investor Service on concern the company will increase debt levels while the drilling market deteriorates. It has about $9 billion of borrowings.
Demand is growing and markets are “calm,” Saudi Arabian Oil Minister Ali Al-Naimi said Feb. 27 in the Red Sea city of Jazan in the nation’s southwest.
U.S. oil production will cease its month-on-month growth in April because of the drop in the rig count, Marios Maratheftis, the Dubai-based global head of research for Standard Chartered Plc, said in Dubai on Feb. 23.
Slowing Output
The U.S. Energy Information Administration reduced its 2015 U.S. crude production forecast to 9.3 million barrels a day in February from 9.42 million in November. The EIA projects output will fall in the third quarter for the first time in four years.
“OPEC’s long-game strategy is on track,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. “It’s suffering short-term financial pain for long-term gain.”
There is a cost to OPEC, of course.
Oil’s plunge will reduce the group’s revenue by about 37 percent this year, according to the U.S. Energy Information Administration. Export revenues for 11 of OPEC’s 12 members, excluding Iran, will shrink to $446 billion in 2015 from $703 billion in 2014, the EIA estimates.
Saudi Arabia’s government said Dec. 25 that it expects a budget deficit in 2015 of 145 billion riyals ($38.7 billion), up from 54 billion in 2014.
