U.S. energy firms this week cut the number of oil rigs operating for a second week in a row to the lowest since January 2022, energy services firm Baker Hughes said in its closely followed report on Nov. 10.

The combined oil and natural gas rig count, traditionally an early indicator of future output, fell by two to 616 in the week to Nov. 10, the lowest since February 2022.

Baker Hughes said that puts the total rig count down 163, or 21%, below this time last year.

The number of active rigs has dropped since December due to weaker energy prices and as many firms return profits to investors and pay down debt rather than spending to boost production. However, U.S. oil and gas production is still set to hit record highs this year as demand grows and the industry boosts efficiency to offset the impact of the lower prices.

The number of oil rigs fell by two to 494 this week, while gas rigs were unchanged at 118.

U.S. oil futures were down about 4% so far this year after gaining about 7% in 2022. U.S. gas futures, meanwhile, have plunged about 32% so far this year after rising about 20% last year.

Despite lower prices for oil and gas, independent exploration and production companies tracked by U.S. financial services firm TD Cowen were set to raise spending by about 20% this year, a slight increase from earlier expectations of a 19% hike. Spending rose about 40% in 2022 and 4% in 2021.

Much of the extra spending, however, is going towards rising inflation-related costs for labor and equipment.

U.S. oil and gas output is expected to rise to record highs in 2023, although the Energy Information Administration (EIA) slightly cut its forecasts this week.

Crude production was on track to rise from 11.9 MMbbl/d in 2022 to 12.9 MMbbl/d in 2023 and 13.2 MMbbl/d in 2024. That compares with a record 12.3 MMbbl/d in 2019.

Gas production was set to rise from a record 99.6 Bcf/d in 2022 to 103.7 Bcf/d in 2023 and 105.1 Bcf/d in 2024.

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