U.S. energy firms cut the number of natural gas rigs by the most in a week since October 2017, while adding the most oil rigs in a week since June, energy services firm Baker Hughes Co said in its closely followed report on Friday.
The total oil and gas rig count, an early indicator of future output, rose two to 761 in the week to Feb. 10.
Baker Hughes said that puts the total rig count up 126, or 20%, over this time last year.
U.S. oil rigs rose 10 to 609 this week, while gas rigs fell eight to 150.
U.S. oil futures were down about 1% so far this year after gaining about 7% in 2022. U.S. gas futures, meanwhile, have plunged about 44% so far this year after rising about 20% last year.
To avoid a looming oversupply situation in the gas market that has already helped pressure prices to 25-month lows earlier this week, many analysts have said producers will likely have to cut the number of rigs drilling for gas this year.
“The lagging (gas) price effect will negatively impact rig count, but do little for 2023. Our base case estimates 740 average total rigs during 2023, with gas rigs materially decreasing over the next 3-4 months,” analysts at Raymond James said in a note. The U.S. investment bank has previously forecast an average of 813 rigs.
Oilfield services firm Patterson-UTI Energy Inc’s chief executive said some rigs focused on drilling gas outside of the northeastern United States may be let go amid the price collapse, while oil-focused regions will see work pick up.
Despite a recovery in drilling since pandemic-related cuts, U.S. crude production has been slow to return to its peak of 12.3 million barrels per day (bpd) in 2019, only reaching 11.9 million in 2022. It is forecast to rise to 12.5 million bpd in 2023 and 12.7 million bpd in 2024, according to government data.
U.S. gas production was to rise on track to rise from a record 98.09 billion cubic feet per day (bcfd) in 2022 to 100.27 bcfd in 2023 and 101.68 bcfd in 2024, the government forecast.