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New Low for Active US Crude Oil and Natural Gas Rigs

As of 12 May, only 339 oil and natural gas drilling rigs were operating in the US, the lowest since the numbers were recorded in 1987—marking a 56% decline (433 rigs) since 17 March. Most of the decrease was in oil-focused geologic plays, but natural-gas-focused plays also saw declines.

 

Within that 2-month period, 71% (308 rigs) of those taken out of service were in the top three US crude-oil-producing regions: the Permian, Eagle Ford, and Bakken. In mid-March, the Permian region had 405 operating rigs; by 12 May, that number had fallen by 57% to 175 rigs. The Eagle Ford and Bakken regions saw similar declines in that period, losing 64% and 69% of their rig counts, respectively.

 

Rig counts have also fallen in natural-gas-focused plays, although those plays had fewer rigs. Earlier this year, the top natural-gas-producing regions were the Marcellus and the Haynesville (not counting the Permian region, which yields much of the associated natural gas and where all rigs are oil-directed). Natural gas rigs in the Marcellus and Haynesville regions declined by 23% and 26%, respectively, from mid-March to 12 May.

Historically, rig counts have tracked with oil prices with a lag time of about 4 months, however, the current drop occurred much more rapidly. The spot price of West Texas Intermediate began March at $46.78/bbl and ended the month at $20.51/bbl. The rig count began to decrease sharply in mid-March, reflecting the sudden drop in petroleum demand associated with COVID-19 restrictions.

 

Similarly, natural gas rig activity has decreased along with natural gas prices, already at multiyear lows in early 2020. The sustained decrease is because of record-high dry natural gas production in November 2019, low demand because of warm weather, and smaller withdrawals from storage during the winter heating season (1 November–31 March).

 

New Low for Active US Crude Oil and Natural Gas Rigs

20 May 2020

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