U.S. energy firms this week cut the number of oil and natural gas rigs operating to the lowest since January 2022, energy services firm Baker Hughes said in its closely followed report on June 7.
The oil and gas rig count, an early indicator of future output, fell by six to 594 in the week to June 7, decreasing for the second time in three weeks.
Baker Hughes said that puts the total rig count down 101, or 15% below this time last year.
Baker Hughes said oil rigs fell four to 492 this week, also their lowest since January 2022, while gas rigs dropped by two to 98, their lowest since October 2021.
The oil and gas rig count dropped about 20% in 2023 after rising by 33% in 2022 and 67% in 2021, due to a decline in oil and gas prices, higher labor and equipment costs from soaring inflation and as companies focused on paying down debt and boosting shareholder returns instead of raising output.
U.S. oil futures were up about 6% so far in 2024 after dropping by 11% in 2023, while U.S. gas futures were up about 16% so far in 2024 after plunging by 44% in 2023.
That increase in oil prices should encourage drillers to boost U.S. crude output from a record 12.9 MMbbl/d in 2023 to 13.2 MMbbl/d in 2024 and 13.7 MMbbl/d in 2025, according to the latest U.S. Energy Information Administration (EIA) outlook.
Even though gas futures were trading higher now, several producers reduced spending on drilling activities earlier in the year after prices dropped to 3-1/2-year lows in February and March.
That drilling decline should cause U.S. gas output to slide to 103 Bcf/d in 2024, down from a record high of 103.8 Bcf/d in 2023, according to the EIA.