U.S. Energy Firms Reduce Oil and Gas Rigs for Third Consecutive Week
U.S. energy firms have continued to decrease the number of oil and natural gas rigs operating for the third consecutive week, according to a report by Baker Hughes. This marks the first time since early September that such a decline has been observed. The oil and gas rig count fell by four to 619 in the week ending October 6, reaching its lowest level since February 2022. Compared to the same period last year, the total rig count is down by 19%.
The number of U.S. oil rigs also dropped, reaching their lowest level since February 2022, with a decrease of five to 497. On the other hand, gas rigs increased by two to 118. While U.S. oil futures have seen a 3% increase this year, gas futures have experienced a significant decline of about 26%. This drop in gas prices has led to a more pronounced slowdown in output growth.
The decrease in active rigs can be attributed to the decline in oil prices since mid-2022. Although oil production has recovered to pre-pandemic levels, its growth has slowed down. It typically takes around 12 months for changes in prices to affect output. Gas output, which has also continued to grow, is a result of increased interest in oil drilling in shale basins that produce associated gas. The Permian basin in West Texas and eastern New Mexico, the largest U.S. oilfield, has been a significant contributor to this growth.
To maximize oil output, shale firms have concentrated their rigs on the most promising well sites and have drilled longer laterals, boosting productivity per well. Exxon Mobil, the top U.S. oil producer, is reportedly planning to expand its presence in the Permian basin and is in advanced talks to acquire Pioneer Natural Resources, the third-largest producer in the region.
While the decrease in rig count may raise concerns, it is important to note that the industry is adapting to market conditions. The focus on efficiency and productivity improvements will help ensure the long-term sustainability of the U.S. energy sector.
Overall, the current decline in rig count reflects the industry’s response to market dynamics, and it will be interesting to observe how these adjustments impact future output levels.