US drillers cut oil/gas rigs for 7th week to lowest since 2021, Baker Hughes says

U.S. energy firms decreased the number of active oil and natural gas rigs for the seventh consecutive week, reaching the lowest level since November 2021, according to Baker Hughes. The total rig count fell by four to 555, with oil rigs down to 439 and gas rigs slipping to 113, driven by lower oil and gas prices prompting firms to prioritize shareholder returns over increased output; despite decreased drilling, the EIA projects crude output to rise to a record 13.4 million bpd in 2025, while an anticipated 84% increase in spot gas prices is expected to boost gas drilling activity this year.

Analysis

U.S. energy firms have reduced their operational oil and natural gas rigs for the seventh consecutive week, bringing the total count to 555, the lowest level recorded since November 2021, as reported by Baker Hughes. This represents a 6% decrease year-over-year, with oil rigs falling by three to 439 (lowest since October 2021) and gas rigs by one to 113. This sustained decline, which amounts to an approximate 5% reduction in 2024 and 20% in 2023, is attributed to lower U.S. oil and gas prices over the past two years, leading energy firms to prioritize shareholder returns and debt repayment over production expansion. Supporting this trend, independent Exploration & Production (E&P) companies plan to cut capital expenditures by roughly 3% in 2025, following flat year-over-year spending in 2024, a stark contrast to significant increases in 2023 (27%) and 2022 (40%). Despite the declining rig count and anticipated continued fall in U.S. spot crude prices for a third consecutive year in 2025, the U.S. Energy Information Administration (EIA) projects a rise in crude output from a record 13.2 million barrels per day (bpd) in 2024 to approximately 13.4 million bpd in 2025. Conversely, for natural gas, the EIA forecasts an 84% surge in spot gas prices in 2025, which is expected to stimulate drilling activity and lift gas output to 105.9 billion cubic feet per day (bcfd) in 2025, up from 103.2 bcfd in 2024.

Key Decisions for Investors

• Investors should closely monitor the divergence between falling U.S. rig counts and the EIA's optimistic crude oil production forecasts, as sustained low drilling activity could eventually constrain supply despite assumed efficiency gains.
• The ongoing capital discipline by E&P firms, focusing on shareholder returns and capex cuts, signals a structural shift that could support commodity prices, but may also cap upside for oilfield service providers like Baker Hughes until a significant activity rebound occurs.
• Consider potential opportunities in natural gas-focused equities or related infrastructure, given the EIA's projection of an 84% spot price increase in 2025 which is anticipated to drive renewed drilling and production growth.