US energy firms reduced oil and natural gas rigs for the second time in three weeks, according to energy services firm Baker Hughes in its closely followed report on Friday.
The oil and gas rig count, which serves as an early indicator of future output, dropped by two to 586 in the week ending August 16. Baker Hughes noted that this brings the total rig count down by 56, or 8.7%, compared to the same period last year. Specifically, oil rigs decreased by two to 483, while gas rigs increased by one to 98.
The oil and gas rig count has seen a decline of approximately 20% in 2023, following a 33% increase in 2022 and a 67% rise in 2021. This downturn is attributed to falling oil and gas prices, increased labor and equipment costs due to soaring inflation, and companies prioritizing debt reduction and enhancing shareholder returns over increasing output. U.S. oil futures have risen by about 7.1% so far in 2024 after a 11% drop in 2023, while U.S. gas futures have fallen by about 14% in 2024 following a 44% plunge in 2023.
U.S. shale firms are continuing to expand production using fewer rigs by enhancing drilling and fracking efficiency. Producers are extending wells to up to three miles, fitting more wells onto a single drilling pad, and fracking multiple wells simultaneously. There is also a growing focus on ultra-high pressure oil wells among major oil companies, leveraging new technology and drill ships capable of safely managing the immense forces involved. Exploiting deep-sea wells under extreme pressures could potentially recover an additional 2 billion barrels from the U.S. Gulf of Mexico.
