U.S. energy firms this week cut the number of oil and natural gas rigs operating for the first time in six weeks as growth in drilling slows despite crude prices hitting their highest since 2018.
The U.S. oil and gas rig count, an early indicator of future output, fell by one to 456 in the week to June 4, according to data on Friday from energy services firm Baker Hughes Co.
Despite this week’s decline, the total rig count was up 172 rigs, or 61%, over this time last year. It was also up 87% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940.
U.S. oil rigs were steady at 359 this week, after rising for four weeks in a row. Gas rigs fell one to 97, dropping for a fourth straight week in the longest losing streak since May 2020.
U.S. crude futures were trading above $69 a barrel on Friday, putting the contract on track for its highest close since October 2018.
With prices mostly rising since October 2020, some energy firms have said they plan to boost spending after cutting drilling and completion expenditures over the past two years.
That spending increase, however, remains small as most firms continue to focus on boosting cash flow, reducing debt and increasing shareholder returns rather than adding output.
Since the middle of February, the rate at which rigs have been added and total number employed have both started to lag behind previous recoveries. ().
Many analysts do not expect that extra spending to boost output at all. Instead, they think it will only replace natural declines in existing well production.
“We continue to see limited remaining upside for rig count activity in the United States, with rig additions having slowed down recently,” analysts at Goldman Sachs said.
Goldman forecast the rig count would reach 490-510 rigs by the end of 2021, keeping U.S. production flat.