The number of oil and gas rigs functioning in the U.S. is expected to reach an all-time low this week – mirroring data going back eight decades- as the energy sector cuts production and spending to deal with the coronavirus-led turmoil in the gas industry.
Last week, the U.S. rig count was four units above the record low of 404 sets in May 2016, based on energy service provider Baker Hughes, which has been tracking rig counts since 1940. Its data for this week is due after 1 p.m.
Fuel demand has declined nearly 30% worldwide, and firms are making drastic cuts to spending, laying off hundreds of workers, and closing manufacturing to offset a global excess. Consumption has picked up modestly in the last couple of weeks, but the overhang of supply is anticipated to last for months, if not years.
Drillers have cut an average of 55 rigs/week since mid-March after crude began to drop as a result of coronavirus and a short oil worth conflict between Saudi Arabia and Russia.
Analysts anticipate corporations will hold pulling rigs for the remainder of the year and might be hesitant to activate many new models in 2021 and 2022.
Raymond James estimated the oil and gas rig count would fall from around 800 at the end of 2019 to about 400 by the middle of the year and 200 at the end of this year. The investment bank expects an average of just 225 operating rigs in 2021.
The count in Canada already dropped to a record low of 26 rigs two weeks ago, based on Baker Hughes.