This week, American energy companies have reduced the count of oil rigs by 11, marking the biggest weekly cut since September 2021, according to the widely monitored report from energy services firm Baker Hughes Co (BKR.O) released on Friday.
This reduction comes on the heels of last week’s decrease of 17 natural gas rigs, the most significant reduction since June 2020.
The count of oil and gas rigs, a preliminary measure of prospective production, dipped by 11, landing at 720 for the week ending May 19. This figure is the lowest recorded since May 2022.
Baker Hughes reported that the total rig count has declined by eight, or 1%, compared to the same period last year, marking the first instance since April 2021 where the count is less than the previous year’s level.
The number of U.S. oil rigs dropped by 11 to 575 this week, reaching their lowest point since June 2022, while the count of gas rigs remained stable at 141.
The majority of the rig count decrease was observed in Texas, where the total number fell by nine to 355 this week, hitting its lowest level since May 2022.
Texas experienced a reduction in rigs in two major shale basins this week. In the Eagle Ford shale, the loss of three rigs brought the total count down to 59, the lowest level since April 2022. The Permian basin also saw a decrease with four rigs lost, reducing the total count to 349, the lowest since March of this year.
Contrastingly, in New Mexico, the rig count increased by one, reaching 109, the highest level since February.
Over the past year, oil production growth in New Mexico outpaced all other states, including top producer Texas. It contributed to half of the nation’s overall increase, underlining its critical role in boosting U.S. oil production.
Enverus, a data provider that releases its own rig count data, reported that drillers decreased the rig count by six in the week ending May 17, bringing the total count to 780. This represents a decrease of approximately 35 rigs over the past month and a 5% drop from the previous year.
In terms of futures, U.S. oil futures have risen 11% this year so far, following a 7% gain in 2022. However, U.S. gas futures have seen a significant drop, declining about 42% this year, after a rise of around 20% last year.
The declining prices have led some extraction and production businesses to reduce their number of rigs, particularly those designed for gas, as a large number are prioritizing returning profits to stakeholders and reducing debt rather than augmenting production.
Even though there are intentions to decrease the number of rigs, the U.S. oil production from the top seven shale basins is expected to surge to an all-time high in June, based on this week’s forecasts from the Energy Information Administration.
