U.S. energy firms this week cut the number of oil and natural gas rigs by the most since June 2020, energy services firm Baker Hughes Co. said in its closely followed report on Feb. 3.
The oil and gas rig count, an early indicator of future output, fell by 12 to 759 in the week to Feb. 3, the lowest since September.
Despite this week's rig decline, Baker Hughes said the total count was still up 146 rigs, or 24%, over this time last year.
U.S. oil rigs fell 10 to 599 this week, their lowest since September, while gas rigs dropped by two to 158.
U.S. oil futures were down about 8% so far this year after gaining about 7% in 2022. U.S. gas futures, meanwhile, have plunged about 46% so far this year after rising about 20% last year.
Overall, U.S. crude production was on track to rise from 11.9 MMbbl/d in 2022 to 12.4 MMbbl/d in 2023 and 12.8 MMbbl/d in 2024, according to federal energy data. That compares with a record 12.3 MMbbl/d in 2019.
Gas production was to rise on track to 100.34 Bcf/d in 2023 and 102.29 Bcf/d in 2024 from a record 98.02 Bcf/d in 2022, according to federal energy data.
Gas consumption, however, was on track to fall to 86.74 Bcf/d in 2023 and 85.79 Bcf/d in 2024 from a record 88.72 Bcf/d in 2022.
Analysts at Tudor Pickering Holt & Co. said the gas market was heading for an oversupply situation and the gas "price needs to head lower to clear the decks of unwarranted supply growth... to force operators to shut down drilling plans."
Drilling contractor Helmerich & Payne this week warned that weaker gas prices could prompt a shift in drilling work, with some equipment moving to shale regions more heavily focused on oil production.
It also said oil and gas producer budgets are slated to be "moderately higher" in 2023, with activity also anticipated to grow modestly in the coming months.
Exxon Mobil Corp., which this week posted record annual profits of $56 billion, boosted spending in new oil and gas projects last year by 37% to $22.7 billion.
Investments can go up to $25 billion this year, Exxon CEO Darren Woods said, part of it explained by rising costs in the Permian, with inflation in the double digits, amid "really, really hot" demand for equipment and services.
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