LA Private

US energy firms cut oil rigs for eighth month while adding new natural gas rigs

July saw US energy firms again cut the number of active oil rigs in use for an eighth straight month while they added new natural gas rigs for the first time in three months.

That was after energy services firm Baker Hughes said in its weekly report on Friday that drillers had cut the number of active oil and gas rigs being used for a third week in a row.

The cuts came despite solid rises in the prices of key crudes last week with US West Texas Intermediate (up 5%) and Brent (up 4.2%).

The US oil and gas rig count, an early indicator of future output, fell by five to 664 in the week to 28th July, the lowest since March 2022.

Baker Hughes said that puts the total rig count down 103, or 13%, below this time last year.

Active oil rigs fell by one to 529 last week, the lowest since March 2022, while gas rigs dropped by three to 128.

For July, US drillers dropped 10 total oil and gas rigs in what was the smallest cut in three months.

Oil rigs dropped by 16 rigs in July. That put the oil count down for an eighth month in a row for the first time since drillers cut oil rigs for a record 12 consecutive months through November 2019.

The oil rig cuts seem to have stabilized US daily oil production well under the 2020 highs of more than 13 million barrels a day (bpd).

US crude oil production in the week ended 21st July fell -0.8% to 12.2 million bpd. That’s well below the February 2020 record-high of 13.1 million bpd (which was on the cusp of the pandemic’s start).

But the US Energy Information Administration (EIA projects ) the country’s crude production remains on track to rise from 11.9 million barrels per day (bpd) in 2022 to 12.6 million bpd in 2023 and 12.9 million bpd in 2024. Daily production averaged 12.3 million bpd in 2019.

Gas rigs, meanwhile, rose by four rigs in July, their first increase in three months.

Friday saw US oil majors, Exxon Mobil, and Chevron reveal a halving in earnings for the three months to 30th June.

Chevron earnings dropped nearly 50% while revenue totaled $US48.89 billion, down 29% from the June 2022 quarter. Meanwhile, ExxonMobil profits fell 53% while sales dropped 28% to $US82.91 billion.

Both companies kept their generous buybacks and dividend programs unaltered.

West Texas Intermediate (WTI) oil futures have rallied around 12% in July, and Brent is up around 13% as the market focuses on tighter global supply, decreasing views for a US recession, and stronger demand in China.

Meanwhile, Comex gold futures eased 0.25% last week to end around $US1,958 an ounce. The driver remains US interest rates and inflation.
Friday’s favourable reading on so-called PCE inflation – the Fed’s favoured measure – was bullish.

The June PCE core deflator, the Fed’s preferred gauge of inflation, eased to +4.1% year on year (y/y) from +4.6% y/y in May, better than expectations of +4.2% y/y and the slowest pace of increase in 1-3/4 years. Also, the June quarter employment cost index rose +1.0% (q/q annualised), much slower than expectations of +1.1% and the smallest pace of increase in 2 years.

This week’s jobs and wages data for July on Friday, as well as tomorrow’s job openings figures for June, will be the big influences this week.