According to the latest report from energy services firm Baker Hughes, U.S. energy companies cut five oil rigs this week, the biggest weekly drop since November 2023.
The total oil and gas rig count fell by six to 613, the lowest level since February 2022. This represents an 18.8% decline from the same period a year ago, with the total rig count down by 142 rigs.
Of the total, the number of oil rigs declined by five to 506, while gas rigs fell by one to 105, the lowest level since December 2021.
The rig count, an early indicator of future output, has been dropping for a second consecutive month. In April, the total rig count fell by eight, with the oil rig count remaining unchanged but gas rigs declining by seven.
The decline in the rig count reflects the broader trend in the industry, which has seen a 20% drop so far in 2023 after rising by 33% in 2022 and 67% in 2021. This is largely due to a decline in oil and gas prices, as well as higher labor and equipment costs driven by soaring inflation. Companies have also been focused on paying down debt and boosting shareholder returns rather than increasing production.
While U.S. oil futures have risen by about 16% so far in 2024, after dropping by 11% in 2023, natural gas futures have plunged by around 35% in 2024, following a 44% decline in 2023.