In their latest report, energy services firm Baker Hughes Co (BKR.O) indicated that U.S. energy companies have decreased the operational oil and natural gas rigs for the sixth consecutive week, a pattern unseen since July 2020.
The weekly count of oil and gas rigs, a forward-looking metric of production, slipped by one to 695 during the week ending on June 9. This marks the lowest count since April 2022.
This week, U.S. oil rigs saw a slight increase, rising by one to 556, while the number of gas rigs fell by two to 135, reaching its lowest since March 2022.
Enverus, a data provider with its own rig count data, reported that drillers decreased the number of rigs by nine in the week ending on June 7, resulting in a total count of 750. This represents a decrease of about 33 rigs over the past month and a 9% drop year-over-year.
Pioneer Natural Resources (PXD.N) Executive Vice President Beth McDonald stated on Thursday that the constraints on oil production are due to increased labour and materials costs, which have eaten into profit margins. Additionally, investors’ insistence on spending restraint has also played a role. Pioneer Natural Resources is the third-largest producer in the Permian, the leading U.S. shale basin.
Despite OPEC’s actions, McDonald mentioned, the margin squeeze is significantly hindering U.S. E&Ps (exploration and production companies) from making substantial progress.
Despite the reduction in production by the Organization of Petroleum Exporting Countries, Saudi Arabia, and Russia, U.S. oil futures have declined approximately 12% this year, following a 7% gain in 2022.
Concurrently, U.S. gas futures have seen a steep drop of about 49% this year, despite an increase of around 20% the previous year.
Goldman Sachs analysts, in a recent note, pointed out that the significant fall in the rig count aligns with their expectations of producers continuing to cut investment in response to low gas prices.
In contrast to the plans to reduce rig counts, the U.S. Energy Information Administration (EIA)’s June forecasts suggest U.S. crude production is expected to rise from 11.9 million barrels per day (bpd) in 2022 to 12.6 million bpd in 2023 and 12.8 million bpd in 2024. This is a notable increase compared to the record of 12.3 million bpd in 2019.
According to the projections by the U.S. Energy Information Administration (EIA), U.S. gas production is expected to increase from a record-setting 98.13 billion cubic feet per day (bcfd) in 2022 to 102.74 bcfd in 2023 and further to 103.04 bcfd in 2024.
