Oil rigs slide most since 2012 with crude at 7-month low

The number of rigs targeting oil in the U.S. shrank last week by the most since 2012 as crude trades at a seven-month low and drillers redirect equipment to focus on the most profitable plays.

Oil rigs tumbled by 25 to 1,564, the lowest level in a month and the largest drop since Dec. 21, 2012, data posted on Baker Hughes Inc’s website today show. Those targeting gas meanwhile jumped to the highest in five months, the Houston-based field services company said.

U.S. benchmark West Texas Intermediate crude declined for a fifth week, the longest losing streak in nine months.

Lower prices threaten to halt a surge in the oil rig count as energy producers use a combination of horizontal drilling and hydraulic fracturing to draw record volumes out of shale formations from North Dakota to Texas. The shale boom has raised domestic production to the highest in 27 years and cut U.S. imports to the lowest seasonal level since 1993. Oil rigs reached a record just last week.

“The primary reason you see changes in the count is scheduling, so operators who have wells throughout different plays are moving rigs as they change targets,” said Evan Turner , energy analyst at the London-based research company GlobalData Ltd. “This is a big move in the count, so it’s likely a combination of that and lower-than-anticipated oil prices, It may be that they target less oil now and go for gas.”

West Texas Intermediate crude for October delivery declined 31 cents, or 0.3 percent, to settle at $93.65 a barrel on the New York mercantile Exchange, down 11 percent in the past year.

“We’ve got oil prices down 10 percent in the last two months, so it’s about time we started seeing some effect on drilling,” James Williams,president of energy consulting company WTRG Economics in London, Arkansas, said by telephone. “We might be back up next week, but there’s going to be downward pressure on oil drilling and most of the pressure is going to be on locations where we’re getting a lower-than-average price for oil.”

Oil production rose 21,000 barrels a day in the week ended Aug. 15 to 8.58 million, Energy Information Administration data show. Output reached the highest level since 1986 in the week of July 11.