The number of oil and natural gas rigs, operating in the US fell this week for the first time in six previous weeks, energy services firm Baker Huges said in a Friday report.
The total number of operational rigs fell by two, settling at 547 in the week to October 10, according to the report.
According to data released by Baker Hughes, the current rig count stands at 39 rigs, or 7%, below the total recorded at the same time last year.
This year-over-year decrease reflects ongoing market dynamics and strategic adjustments within the oil and gas industry, which can be influenced by factors such as fluctuating commodity prices, drilling costs, regulatory environments, and investor sentiment.
A declining rig count often signals a potential slowdown in future oil and gas production, as fewer active rigs mean less new drilling activity and therefore, less new supply coming online in the coming months.
Oil rigs
This week, the number of oil rigs decreased by four to 418, according to the report.
Conversely, gas rigs increased by two to 120, reaching their highest level since August.
The Permian Basin, a vast and prolific oil-producing shale formation that spans West Texas and eastern New Mexico, remains the largest contributor to US oil output.
However, recent data indicated a notable shift in drilling activity.
This week, the rig count in the Permian Basin decreased by one, bringing the total to 250 operational rigs.
This figure represents the lowest rig count observed in the region since September 2021, marking a significant downturn in drilling operations over the past several years.
Texas’s rig count fell by six this week, reaching 238, its lowest level since September 2021.
Lower prices impact rigs count
Over the last two years, the US oil and gas rig count saw a significant reduction—20% in 2023 and an additional 5% in 2024, according to a Reuters report.
This decline was primarily driven by lower oil and gas prices, which led energy companies to prioritise shareholder returns and debt reduction over increasing production.
US financial services firm TD Cowen reports that independent exploration and production (E&P) companies it tracks anticipate a roughly 4% reduction in capital expenditures for 2025 compared to 2024 levels.
Spending has shown varied year-over-year changes: it remained relatively flat in 2024, surged by 27% in 2023, increased by 40% in 2022, and rose by 4% in 2021.
Production outlook
Despite analyst predictions of a third consecutive annual decline in US spot crude prices for 2025, the US Energy Information Administration (EIA) forecasts an increase in crude output.
The EIA projects production to rise from a record 13.2 million barrels per day (bpd) in 2024 to approximately 13.5 million bpd in 2025.
Additionally, the EIA predicts a significant increase in spot gas prices (56%) in 2025.
This rise is expected to incentivise producers to ramp up drilling activities.
The prediction of a rise in gas prices this year follows a 14% price decline in 2024, which led several energy companies to reduce output for the first time since 2020, when the COVID-19 pandemic suppressed fuel demand.
The EIA forecasts an increase in gas output to 107.1 billion cubic feet per day (bcfd) in 2025. This represents a rise from 103.2 bcfd in 2024 and surpasses the record 103.6 bcfd achieved in 2023.
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