U.S. energy companies reduced the number of active oil and natural gas rigs this week to the lowest level since January, according to energy services firm Baker Hughes (NASDAQ:BKR) in its closely watched report released Friday.
The total rig count, which serves as an early signal of future production, fell by six to 578 for the week ending May 9. Compared to the same time last year, the total is down by 25 rigs, or about 4%, Baker Hughes reported.
Specifically, oil rigs dropped by five to 474 — their lowest point since January — while gas rigs held steady at 101.
The total number of rigs dropped roughly 5% in 2024 and fell by 20% in 2023, as softer U.S. oil and gas prices in recent years led companies to prioritize returning capital to shareholders and cutting debt rather than expanding production.
Although analysts expect oil prices to decline for a third consecutive year in 2025, the U.S. Energy Information Administration (EIA) recently projected U.S. crude production would still increase, climbing from a record 13.2 million barrels per day (bpd) in 2024 to about 13.4 million bpd in 2025. However, the EIA revised this growth downward from its April outlook, citing weaker oil price forecasts as rising U.S. tariffs weigh on global economic growth and energy demand.
On the natural gas front, the EIA forecasted an 88% jump in spot gas prices in 2025, which is expected to spur producers to ramp up drilling this year. This comes after gas prices tumbled 14% in 2024, leading many energy companies to cut output for the first time since the COVID-19 downturn in 2020. The EIA estimates gas production will rise to 104.9 billion cubic feet per day (bcfd) in 2025, up from 103.2 bcfd in 2024 and the record 103.6 bcfd seen in 2023.
Meanwhile, Texas — the top oil-producing state in the U.S. — saw drilling permit applications fall to a four-year low in April, according to consultancy Enverus, reflecting concerns that increasing OPEC+ supply and global trade tensions will continue to pressure crude prices. Texas operators filed 570 new drilling permits in April, down from 795 in March and the lowest since February 2021.
Several shale companies are also scaling back. Diamondback Energy (NASDAQ:FANG) announced Monday it plans to cut three rigs in the second quarter and may reduce further if oil prices decline. Coterra Energy (NYSE:CTRA) is trimming its 2025 Permian Basin activity by three rigs, while Matador Resources (NYSE:MTDR) intends to drop one rig by mid-2025.
