U.S. energy firms this week cut the number of oil and natural gas rigs operating for a third week in a row for the first time since October, energy services firm Baker Hughes said in its closely followed report on April 5.
The oil and gas rig count, an early indicator of future output, fell by one to 620 in the week to April 5, the lowest since early February.
Baker Hughes said that puts the total rig count down 131, or 17%, below this time last year.
Baker Hughes said oil rigs rose two to 508 this week, while gas rigs fell by two to 110, their lowest since January 2022.
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 22% so far in 2024 after dropping by 11% in 2023. U.S. gas futures, meanwhile, were down about 28% 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 13.6 MMbbl/d in 2025, according to the latest U.S. Energy Information Administration (EIA) outlook.
But the drop in gas prices to a 3-1/2-year low in February and March will cut U.S. gas output to 103.4 Bcf/d in 2024 from a record 103.8 Bcf/d in 2023, according to the EIA, as some producers slash spending and reduce drilling activities.
Analysts, however, said it could take a few months for those planned gas rig reductions to show up in the data.
Recommended Reading
Hedge Funds Retreat from Oil as War Risk Fades: Kemp
2024-04-29 - Hedge funds and other money managers sold the equivalent of 95 MMbbl in the six most important petroleum futures and options contracts over the seven days ending on April 23.
What's Affecting Oil Prices This Week? (May 6, 2024)
2024-05-06 - Stratas Advisors forecast that oil demand for 2024 will increase by 1.41 MMbbl/d in comparison to 2023 and that oil demand will increase by 810,000 bbl/d in comparison to 2Q23.
Oil Broadly Steady After Surprise US Crude Stock Drop
2024-03-21 - Stockpiles unexpectedly declined by 2 MMbbl to 445 MMbbl in the week ended March 15, as exports rose and refiners continued to increase activity.
What's Affecting Oil Prices This Week? (April 8, 2024)
2024-04-08 - Stratas Advisors says geopolitics are providing a boost for oil prices as conflicts escalate–and while crude oil and oil products continue to flow, the possibility of disruption is increasing.
Paisie: Crude Prices Rising Faster Than Expected
2024-04-19 - Supply cuts by OPEC+, tensions in Ukraine and Gaza drive the increases.