(Bloomberg) -- Shale explorers reduced the number of rigs drilling for oil in the U.S. this week, snapping a record expansion in a sign the boom may be waning as prices linger near $45 a barrel.
Working rigs targeting crude fell by 2, bringing the total to 756, according to Baker Hughes Inc. data reported Friday. The reduction ended 23 straight weeks of rig additions, the longest stretch of uninterrupted growth on records dating back to 1987. Before this week, the rig count more than doubled from a low of 316 in May 2016 as shale explorers ramped up production.
"There were so many rigs added earlier this year that the pace is not sustainable," Brian Youngberg, energy analyst at Edward Jones & Co., said by phone. "If oil stays in the 40s we will definitely see a slowdown."
The price of West Texas Intermediate, the U.S. benchmark, extended its seven-day rebound from last week’s doldrums and rallied on the rig count news to trade as high as $45.92 a barrel in New York. Prices were also boosted by a reduction in U.S. crude production of 100,000 barrels a day to 9.25 million reported on Wednesday.
U.S. shale producers have been adding rigs in 2017 even as prices weakened on concerns about oversupplies. OPEC’s decision in May to extend output cuts implemented last year did little to boost the market. U.S. shale fields have been increasing output thanks to lower production costs that help them maintain profits at lower prices. But the drop this week may be a sign explorers are being more cautious.
Deeper cuts from OPEC and non-OPEC producers alike may be needed to re-balance the market, according to a Goldman Sachs Group Inc. report released Wednesday.
"The approach adopted so far by OPEC has ultimately proved self-defeating by cutting too little but reassuring too much," the report wrote.
The prolific Permian play in West Texas and New Mexico was the only field of the U.S. big four to expand this week, adding one rig for a total of 370 oil rigs working there. This week’s decline in rig counts came despite predictions by analysts that oil would have to fall below $40 for producers to pull back rigs.
"The rig count is modestly bullish for oil prices, reflecting market concerns that shale plays are ramping up too quickly," Youngberg said.