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US oil, natural gas drilling dropped lowest since 1940

(Credit: Daniel Acker/Bloomberg via Getty Images) A pumpjacks operates in the foreground of a crude oil drilling rig outside Williston, North Dakota, U.S., on Thursday, Feb. 12, 2015. A plunge in global energy prices that has put some North Dakota oil rigs in a deep freeze has yet to chill the state's hiring climate.

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Drilling activity for oil and natural gas in the US fell to record low since 1940. Energy companies are reducing drilling activity in the wake of weaker oil prices in the global markets.  Oil firms may slash spending by 50 percent this year owing to adverse conditions in the markets

Oil services company Baker Huges Inc said petroleum and natural gas drilling firms were  preferring to reduce their activity owing to steel fall in oil prices. The number of oil rigs declined for 12th consecutive week as rig count down six to 386, the lowest since December 2009. The number of gas rigs fell by three to 94 lowest since 1987. 

Reuters reports that energy companies have been reducing drilling activity since mid-2014 from when the selloff in global crude began. However, energy analysts believe that the rig count may rebound later part of 2016. Oil prices had bottomed out in February as crude prices in the US touched $26 a barrel indicating 12-year low. 

US crude futures rose seven percent by the end of previous week at $38.50 a barrel. Crude prices rose for four weeks as buying support was extended on tighter supplies as US and non-OPEC crude output declined by more than expected. Chevron Corp has decided to add two rigs in the oil-rich Permian shale of West Texas this year. Chevron Corp forecasts price recovery in 2016.

After hitting 13-year low of $26 a barrel, oil prices recovered to $39 per barrel now. Natural gas prices are still hovering at 17-year lows. According to Baker Hughes, only 480 rigs were operations in oil and natural gas segments last week. This was a decline of 57 percent from the previous corresponding period. US shale production is dropping fast as current lower oil prices are not enough to make them profitable, as reported by CNN Money.

However, other oil firms are continuing to reduce drilling activity. BP Plc in Alaska is reducing rigs in Prudhoe Bay field from five to two. It has already retrenched 200 workers, who were on contracting jobs. Some drilling firms are investing in new technologies. Latest technology applications including 'Choking' and 'lifting' are aimed at enhancing production levels. But, lower oil prices are discouraging these efforts as well. 

Fox Business quoting Morgan Stanley's latest forecast, said that exploration and production companies in North America would cut spending on oil and gas rigs by over 50 percent in 2016, when compared to 2015. It's also further estimated that oil firms may increase spending by over 40 percent in 2017 from 2016. 

Swiss banking major UBS has cut expectations on rig count in North America as drilling activity during first quarter fell 26 percent when compared with fourth quarter of 2015. US oil output may decline from 9.4 million barrels per day in 2015 to 8.7 million barrels per day this year and further 8.2 million barrels per day in 2017, according to projections made by the US officials. 

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