US drillers last week cut the number of oil and natural gas rigs operating for the tenth time in 11 weeks. Rig count is an early indicator of future production.
The total count is now down by 81 rigs, or 11%, when compared with the same period last year.
US oil rigs fell by three units to 537 during the week, their lowest point since April 2022. Gas rigs fell by two to 133.
According to in-depth data from Baker Hughes, drillers cut five rigs in the Permian Basin in west Texas and eastern New Mexico. This is the country’s largest shale oil basin. This brought total oil and gas count down to 337, the lowest since May 2022.
US oil futures are down around 6% so far this year after gaining roughly 7% in 2022. US gas futures, however, have dropped by around 44% so far this year after rising 20% last year. This is reflected in a drop in gas prices.
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Following Russia’s invasion of Ukraine in 2022, gas prices soared as international supply chains were disrupted. Prices have dropped significantly this year, returning to prices similar to those at which gas was trading prior to the invasion. In some instances, gas prices have dropped even lower.
US natural gas prices dropped by around 50% during the first quarter of 2023, a record drop for a quarter. Rising output and mild weather that has allowed utilities to leave greater amounts of gas in storage have prompted the price fall.
The US Government, however, predicts that production will remain high. It has projected that gas production will reach 100.67 billion cubic feet per day (bcfd) in 2023, up from 98.09bcfd in 2022.