(Reuters) - Less than two months into the year, the top U.S. shale oil companies have already cut their budget for 2016 a second time as the relentless drop in oil prices continues to erode their cash flow.

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson

With oil prices firmly wedged in the low $30-per-barrel range, oil producers are deferring spending on new wells and projects.

“Companies’ language has shifted towards preserving balance sheets and cash, and keeping expenditure within cash-flows, which means that budgets are going to fall further,” said Topeka Capital Markets analyst Gabriele Sorbara.

Eighteen of the top 30 U.S. oil companies by output have so far outlined their spending plans for 2016. They have reduced their budget by 40 percent on average, steeper than most analysts’ expectations, according to a Reuters analysis.

These 30 companies had, on average, lowered their spending plans for 2016 by more than 70 percent last year.

Some such as Hess Corp and ConocoPhillips, who had already planned to spend less this year than in 2015, have now further cut their capital expenditure targets. Others are expected to follow suit.

But, is there room for further cuts?

While reduced prices for oilfield services and increased efficiencies have helped companies scale back spending, many industry experts say there may not be room for further cuts.

“It’s almost like a 80/20 rule – 80 pct of the cost reduction has already occurred, another 20 percent remains,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors LLC.

Although, the reduced spending has not yet impacted shale output, production is expected to start falling by the end of the year.

“The capital cuts that the industry is making should result in ... a supply shock to the downside,” ConocoPhillips’ chief executive, Ryan Lance, said on Thursday.

U.S. crude oil production is expected to decline to 8.5 million barrels per day (mmb/d) in November 2016, from 9.2 mmb/d in December 2015, according to the U.S. Energy Information Administration.

Even if the supply cuts lead to a recovery in oil prices, spending on exploration and production is not expected to bounce back immediately.

“If you’re burning cash during low oil prices – and the longer that happens, the more pressure on the balance sheet – that means in a recovery scenario, it’s likely going to take longer for producers to commit to larger capex budgets,” said Fraser McKay, an analyst at energy consultancy Wood Mackenzie.