Baker Hughes reports the most significant drop in the US oil rig count since September 2021.

In their highly anticipated report released on Friday, energy services company Baker Hughes Co (BKR.O) stated that US energy companies have slashed the number of operational oil rigs to an extent not seen since September 2021.

This marks the fifth consecutive week of decreases in the overall count.

The count for oil and gas rigs, a leading indicator of forthcoming production, diminished by 15, landing at 696 for the week ending on June 2. This count represents the lowest since April 2022.

Baker Hughes reported that the current total rig count is 31 units, or 4%, less than the same period last year.

The count of operational U.S. oil rigs plummeted by 15 to 555 this week, reaching its lowest point since April 2022, while the number of gas rigs remained steady at 137.

In the state of Texas, which hosts several oil and gas fields including the Permian – the largest oil shale basin in the country – the number of drilling rigs was reduced by six this week. This brought the total land rig count in the state down to 351, the smallest number since May 2022.

Meanwhile, data provider Enverus, who independently publishes rig count data, reported an eight-rig decrease for the week ending May 31, lowering the overall count to 759. This signifies a reduction of about 33 rigs over the past month and a 7% decrease on a year-over-year basis.

Since December, drilling activities have diminished due to declining prices, inflated costs, and as businesses allocate funds towards reimbursing shareholders.

In May, the number of oil rigs decreased for the sixth consecutive month, marking the most significant monthly dip in nearly three years. Simultaneously, gas rigs witnessed their most substantial monthly drop since 2016, as per the data from Baker Hughes released last week.

Despite a robust increase in U.S. oil and gas output in March, the slowdown in drilling is expected to eventually lead to decelerated production growth, typically following a six-month delay.

As for U.S. oil futures, they’ve dipped about 11% year-to-date, compared to a rise of around 7% in 2022. On the other hand, U.S. gas futures have experienced a significant plunge of about 51% this year, after appreciating roughly 20% the previous year.

The plummet in gas prices has already triggered certain exploration and production companies, such as Chesapeake Energy Corp (CHK.O), to declare intentions to lower production by scaling back on some rigs, particularly in the Haynesville shale areas of Arkansas, Louisiana, and Texas.

Analysts at EBW Analytics, a consultancy, noted this week that it might take several more months before the dwindling rig count begins to impact completions and counter the increasing production in Haynesville.

To account for the smaller decline in gas rig count compared to oil rig count in recent weeks, they stated, “A number of (gas) drillers are looking forward to the anticipated surge in LNG (liquefied natural gas) demand over the forthcoming 30 months and are hesitant to reduce their production capabilities.”

On another note, the CEO of Exxon Mobil Corp (XOM.N), the leading U.S. producer, expressed his intention on Thursday to double oil production at the company’s shale assets over a span of five years by leveraging novel technologies.

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