U.S. and Canadian energy firms cut the number of oil and natural gas rigs operating to a record low as they slash spending on new drilling after global coronavirus lockdowns caused energy prices and demand to collapse.
The U.S. oil and gas rig count, an early indicator of future output, fell by 17 to an all-time low of 301 in the week to May 29, according to data from energy services firm Baker Hughes Co going back to 1940.
That was 683 rigs, or 69%, below this time last year and was the fourth week in a row the U.S. count fell to a fresh record low.
For the month, the U.S. rigs dropped by 164, its third monthly decline in a row.
The Canadian rig count fell by one to an all-time low of 20 this week, according to Baker Hughes.
7 rigs were drilling for oil; 13 for natural gas.
The drilling activity in Alberta remained at 10 since last week. Saskatchewan’s drilling also remained at 2 rigs.
That was 65 rigs, or 76%, below this time last year and was the third week in a row it fell to a record low.
Analysts said they expect U.S. energy firms to continue chopping rigs for the rest of the year and keep the count low in 2021 and 2022.
“Rig activity should … drop below 300 despite the recent modest recovery in oil prices. Obviously, lower drilling activity will lead to production decline,” said James Williams of WTRG Economics in Arkansas, noting “Natural gas drilling should start to recover before oil.”
U.S. crude futures were trading above $33 a barrel on Friday, up about 78% this month but still down about 45% since the start of the year.
U.S. oil rigs fell 15 to 222 this week, their lowest since June 2009, while gas rigs fell two to 77, their lowest on record according data going back to 1987.