Baker Hughes says oil producers unlikely to extend spending this 12 months

By Arathy Somasekhar

HOUSTON (Reuters) – U.S. oil and fuel producers are unlikely to extend spending this 12 months and output will increase will primarily come from improved efficiencies relatively than new drilling, Baker Hughes Chief Govt Lorenzo Simonelli mentioned on Monday.

The outlook comes as U.S. President Donald Trump’s administration has repeatedly exhorted the trade to “Drill, child, drill,” to maximise oil and fuel manufacturing and cut back shopper vitality prices.

Nonetheless, oil costs have fallen this 12 months and plenty of producers stay centered on capital self-discipline over uninhibited drilling.

Capital spending by oil and fuel corporations shall be restricted by the wave of consolidation that swept the trade in recent times, Simonelli mentioned on the sidelines of the CERAWeek convention by S&P International in Houston.

“There is a dislocation between the rig rely and manufacturing, simply pushed by the efficiencies of extra trendy rigs, in addition to then the manufacturing efficiencies,” he mentioned.

U.S. crude oil futures have eased to lower than $67 a barrel in latest weeks, elevating fears that the producers may pull again on drilling. Some corporations, together with Chevron and rival SLB, have introduced plans to restructure and lay off workers.

Baker Hughes doesn’t count on to restructure or cut back its workforce presently, Simonelli mentioned.

Giant producers haven’t but indicated any adjustments to their capital spending plans regardless of easing oil costs, Simonelli mentioned. Smaller producers will react faster to cost inflections, he added.

The corporate additionally expects any affect from Trump’s tariff proposals to be manageable and mitigated, Simonelli mentioned.

(Reporting by Arathy Somasekhar in Houston; Enhancing by Liz Hampton and Marguerita Choy)