This week, U.S. energy firms reduced the number of operating oil and natural gas rigs to the lowest level since January 2022, according to a closely followed report by energy services firm Baker Hughes released on Friday.
The oil and gas rig count, an early indicator of future output, fell by four to 590 in the week ending June 14. This marks the second consecutive week of decline. Baker Hughes reported that the total rig count is down by 97 rigs, or 14%, compared to the same time last year.
Baker Hughes reported that oil rigs decreased by four to 488 this week, reaching their lowest level since January 2022, while gas rigs remained unchanged at 98, the lowest since October 2021. In Texas, which hosts nearly half of the country’s active rigs, the total count fell by two to 285, the lowest since January 2022.
The oil and gas rig count has dropped about 20% in 2023, following a 33% increase in 2022 and a 67% rise in 2021. This decline is attributed to lower oil and gas prices, higher labour and equipment costs due to soaring inflation, and companies prioritizing debt repayment and shareholder returns over increasing output.
U.S. oil futures have risen about 10% so far in 2024 after declining by 11% in 2023, while U.S. gas futures have increased by approximately 15% in 2024 following a 44% drop in 2023.
This rise in oil prices is expected to encourage drillers to boost U.S. crude output from a record 12.9 million barrels per day (bpd) in 2023 to 13.2 million bpd in 2024, and further to 13.7 million bpd in 2025, according to the latest outlook from the U.S. Energy Information Administration (EIA).
Despite the current rise in gas futures, several producers reduced spending on drilling activities earlier this year after prices fell to 3.5-year lows in February and March. This reduction in drilling is expected to cause U.S. gas output to decrease to 102.1 billion cubic feet per day (bcfd) in 2024, down from the record high of 103.8 bcfd in 2023, according to the EIA.
