The price of WTI crude oil spiked more than 8 percent to around $48 per barrel on Friday, when Baker Hughes Incorporated BHI 3.42% released its weekly U.S. rotary drill rig numbers. An acceleration of falling rig counts could be an indication that the oil and gas industry is now moving more swiftly to adapt to current market conditions.
The Numbers
Baker Hughes announced 1,543 active rigs on Friday, indicating that 90 rigs were shut down last week. The current number represents the lowest number of active rigs in the U.S. since 2010.
In addition, the updated count represents a year-over-year drop of 242 rigs. Out of the 1,543 active rigs, 1,223 are drilling primarily for oil and 320 drill primarily for gas. There are 199 less active oil-drilling rigs year-over year and 39 less gas-drilling rigs.
Hardest Hit Regions
Texas was the state hit the hardest by the drop in active rig count, losing 58 out of the 90 rigs. Oklahoma’s active rig count dropped by 10. California and Pennsylvania each added a single rig during the week, the only two states to do so.
By basin, the Permian was hit hardest, losing 27 rigs on the week. The Eagle Ford Basin lost three rigs and the Williston Basin lost five.
Oil Prices React
Oil investors see rig shutdowns as a positive for the price of crude, as current production levels far exceed worldwide demand. According to RBN Energy, rig counts at over a dozen onshore drilling companies will drop by a combined 42 percent in 2015, and the companies are projected to lower capex by 28 percent this year.
However, companies are being very selective by shutting down the least-productive and least-efficient rigs first. Even with reduced rig counts, oil production from onshore drillers is still expected to rise in 2015 by more than 10 percent.
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