This week, Baker Hughes, a prominent energy services company, reported that U.S. energy companies have reduced the operation of oil and natural gas rigs for the tenth time in the past eleven weeks.
This indicates a continuous decline in the number of operational rigs in the industry.
The oil and gas rig count, which provides early indications of future production, dropped by 5 to 675 for the week ending July 14. According to Baker Hughes, this represents an 11% decrease, or 81 fewer rigs compared to the same time last year.
The number of operational U.S. oil rigs decreased to 537, the lowest since April 2022, marking a reduction of 3 this week. Concurrently, the gas rig count fell by 2, resulting in a total of 133 operational rigs.
In the Permian, the largest shale oil basin stretching from West Texas to eastern New Mexico, the number of drillers fell by five, reducing the total oil and gas count to 337, the lowest since May 2022.
In contrast, data provider Enverus reported that the number of operating rigs remained steady at 732 for the week ending July 12.
However, this still signifies a decrease of approximately 17 rigs over the past month and a 14% drop year-over-year. After witnessing a 7% gain in 2022, U.S. oil futures have declined about 6% this year. U.S. gas futures have plummeted about 44% this year after a 20% increase in the previous year.
The substantial drop in gas prices has prompted some exploration and production companies, including Chesapeake Energy, Southwestern Energy, and Comstock Resources, to scale back production by cutting rigs.
This trend is particularly noticeable in the Haynesville shale located in Arkansas, Louisiana, and Texas. Energy Transfer and Williams Cos, according to East Daley Analytics, an energy research firm, have experienced some of the largest reductions in rig count.
