The U.S. oil and gas rig count fell by 44 this month, the biggest drop in three years, after energy firms this week cut rigs for a fourth week in a row, energy services firm Baker Hughes Co said in its closely followed report on Friday.
The oil and gas rig count, an early indicator of future output, fell by nine to 711 in the week to May 26, the lowest since May 2022.
Baker Hughes said that puts the total rig count down by 16, or 2%, below this time last year.
U.S. oil rigs fell by five to 570 this week, their lowest since May 2022, while gas rigs dropped by four to 137, their lowest since March 2022.
In May, the oil count fell by 21 rigs, which was the biggest monthly drop since June 2020.
The gas count dropped by 24 rigs in May in its biggest monthly rig decline since January 2016.
Data provider Enverus, which publishes its own rig count data, said drillers cut 13 rigs in the week to May 24, dropping the overall count to 767. That put the count down about 42 rigs over the past month and down 7% over the past year.
U.S. oil futures were down about 10% so far this year after gaining about 7% in 2022. U.S. gas futures, meanwhile, have plunged about 50% so far this year after rising about 20% last year.
The massive drop in gas prices has already caused some exploration and production companies like Chesapeake Energy Corp to announce plans to reduce production by cutting some rigs – especially in the Haynesville shale in Arkansas, Louisiana and Texas.
“Our view is that current gas prices incentivize Haynesville producers to ultimately halt growth, so we see further declines from the current count as likely,” analysts at Goldman Sachs said in a note this week.
Most of the rig reductions this week were in the Haynesville where the total count dropped by three to 54, the lowest since February 2022.
Analysts at energy advisory Ritterbusch and Associates said in a note this week that there would likely be “several weeks of lag time before reduced rigs translate to a meaningful cut in production.”