U.S. energy firms this week cut the number of oil rigs operating for a second week in a row to the lowest since January 2022, energy services firm Baker Hughes said in its closely followed report on Friday.
The combined oil and natural gas rig count, traditionally an early indicator of future output, fell by two to 616 in the week to Nov. 10, the lowest since February 2022.
Baker Hughes said that puts the total rig count down 163, or 21%, below this time last year.
The number of active rigs has dropped since December due to weaker energy prices and as many firms return profits to investors and pay down debt rather than spending to boost production. However, U.S. oil and gas production is still set to hit record highs this year as demand grows and the industry boosts efficiency to offset the impact of the lower prices.
The number of oil rigs fell by two to 494 this week, while gas rigs were unchanged at 118.
U.S. oil futures were down about 4% so far this year after gaining about 7% in 2022. U.S. gas futures, meanwhile, have plunged about 32% so far this year after rising about 20% last year.
Despite lower prices for oil and gas, independent exploration and production companies tracked by U.S. financial services firm TD Cowen were set to raise spending by about 20% this year, a slight increase from earlier expectations of a 19% hike. Spending rose about 40% in 2022 and 4% in 2021.
Much of the extra spending, however, is going towards rising inflation-related costs for labor and equipment.
U.S. oil and gas output is expected to rise to record highs in 2023, although the Energy Information Administration (EIA) slightly cut its forecasts this week.
Crude production was on track to rise from 11.9 million barrels per day (bpd) in 2022 to 12.9 million bpd in 2023 and 13.2 million bpd in 2024. That compares with a record 12.3 million bpd in 2019.
Gas production was set to rise from a record 99.6 billion cubic feet per day (bcfd) in 2022 to 103.7 bcfd in 2023 and 105.1 bcfd in 2024.
(Reporting by Scott DiSavino Editing by Marguerita Choy)