U.S. drillers reduce oil and gas rigs for second consecutive week

U.S. energy companies have reduced the number of active oil and natural gas rigs for the second straight week, marking the first such decline since late June, according to Baker Hughes' report. The total rig count, an early indicator of future production, fell by one to 585 during the week ending August 23. This brings the rig count down by 47, or 7%, compared to the same period last year. Specifically, the number of oil rigs remained unchanged at 483, while gas rigs decreased by one, bringing the total to 97. The rig count has dropped by about 20% in 2023, following increases of 33% in 2022 and 67% in 2021. This decline is attributed to falling oil and gas prices, higher labour and equipment costs due to inflation, and a strategic shift by companies to prioritise debt reduction and shareholder returns over increasing production. Despite a 5% rise in U.S. oil futures so far in 2024, following an 11% drop in 2023, U.S. gas futures have decreased by about 19% this year after a 44% plunge in 2023. The increase in oil prices is expected to encourage drillers to boost U.S. crude output, with projections from the U.S. Energy Information Administration (EIA) suggesting production will rise from a record 12.9 million barrels per day (bpd) in 2023 to 13.2 million bpd in 2024 and 13.7 million bpd in 2025.

On the natural gas front, several producers have cut back on drilling activities earlier this year after prices fell to their lowest levels in three and a half years during February and March. This reduction in drilling is expected to decrease U.S. gas output to 103.3 billion cubic feet per day (bcfd) in 2024, down from the record high of 103.8 bcfd in 2023, according to the EIA.

(ET)