According to Baker Hughes’ highly anticipated report on Friday, the number of oil and natural gas rigs in the United States experienced a significant decline this week, reaching its lowest point in nearly a year.
Notably, the number of gas rigs plummeted by the most within a week since February 2016.
Following the release of Baker Hughes’ report, there was a swift surge of over 5% in U.S. natural gas futures, driven by expectations that the reduction in rig count would lead to a decrease in output later in the year.
The total count of oil and gas rigs, which serves as an early indicator of future production, dropped by 17 to reach 731 during the week ending on May 12. This figure represents the lowest count since June 2022, with the weekly decrease being the most significant since June 2020.
Baker Hughes reported that the current rig count indicates a mere 17-rig increase, or 2%, compared to the same period last year. This is a significant drop from the end of 2022 when the rig count was 193 rigs higher than the previous year.
During this week, U.S. oil rigs experienced a decline of two, reaching 586 rigs, marking their lowest count since June 2022. Similarly, gas rigs witnessed a substantial drop of 16, totalling 141 rigs, the lowest count since April of last year.
Year-to-date, U.S. oil futures have declined by approximately 13% after a 7% increase in 2022. On the other hand, U.S. gas futures have experienced a sharp decline of about 49% so far this year, following a 20% rise last year.
As a result of the decline in gas prices, several exploration and production companies, such as Chesapeake Energy Corp (CHK.O), Southwestern Energy Co (SWN.N), and Comstock Resources Inc (CRK.N), have announced their intentions to reduce production by scaling back on gas rigs, particularly in the Haynesville shale region spanning Arkansas, Louisiana, and Texas.
According to Baker Hughes, the number of active rigs in Haynesville, the third-largest shale gas field in the country, dropped by five this week to 57, reaching its lowest count since February 2022. Similarly, the rig count in the Eagle Ford shale located in South Texas decreased by two this week to 62, marking its lowest count since May 2022.
Despite these plans to decrease rig counts, projections from the U.S. Energy Information Administration (EIA) in May indicate that U.S. crude production is still expected to rise. It is projected to reach a new record high of 12.5 million barrels per day (bpd) in 2023 and further increase to 12.7 million bpd in 2024, surpassing the previous record set in 2019 at 12.3 million bpd.
According to projections from the U.S. Energy Information Administration (EIA), U.S. gas production is expected to continue increasing. After reaching a record high of 98.13 billion cubic feet per day (bcfd) in 2022, it is projected to rise to 101.09 bcfd in 2023 and further to 101.24 bcfd in 2024. These estimates suggest a steady growth trend in U.S. gas production over the coming years.
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