The most significant monthly decline in US oil and gas rigs since 2020 was witnessed in May, according to Baker Hughes.

Baker Hughes Co, a renowned energy services firm, reported on Friday that the US oil and gas rig count has seen a significant decline this month, marking the largest monthly decrease in three years.

In the course of four weeks, energy companies have consistently reduced rigs leading to a drop of 44 in total.

As of the week leading to May 26, the rig count – which is a preliminary signal of future output – slipped by nine to 711, representing the lowest since May 2022.

The total rig count has now decreased by 16, a 2% drop compared to the same period last year, Baker Hughes stated. US oil rigs count dropped by five to 570 this week, hitting a low not seen since May 2022. Similarly, gas rigs also fell by four to 137, the lowest since March 2022.

In May, the decline in the oil rig count was recorded at 21, making it the most substantial monthly decrease since June 2020. Moreover, the gas rig count fell by 24, marking the largest monthly decline since January 2016.

According to Enverus, an independent data provider, drillers reduced 13 rigs in the week leading to May 24, taking the overall count to 767. This reflects a monthly decrease of around 42 rigs and a yearly decrease of 7%.

As of this year, US oil futures have fallen roughly 10% after experiencing a 7% gain in 2022. In contrast, US gas futures have plummeted about 50% this year, following a 20% rise last year. Consequently, some exploration and production companies, like Chesapeake Energy Corp, are planning to cut back on production by reducing rigs, notably in the Haynesville shale spanning Arkansas, Louisiana, and Texas.

Goldman Sachs analysts recently noted that current gas prices may eventually discourage Haynesville producers from expanding, predicting more rig count declines in the future.

Ritterbusch and Associates, an energy advisory firm, suggested in a note this week that it would take a few weeks before the reduction in rigs significantly impacts production levels.

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