As Permian Basin drilling continued its decline, the U.S. oil and gas rig count fell 34 to a total of 398 in the week ending May 6, according to data from provider Enervus on Thursday. Oil rigs led the decline with a loss of 29 rigs on the week to 286, while gas rigs lost 5 to 112 rigs on the week, according to S&P Global.
Worldwide, fuel demand has dropped about 30 percent and companies are making drastic cuts in spending, laying off thousands of workers, and closing down production in order to offset the global glut.
Even though there has been a very modest pickup in consumption recently, due to the limited reopening of some nations, the over-supply of petroleum is expected to last for months, if not years.
An average of 55 rigs per week has been cut since mid-March – when crude prices began to plunge due to the COVID-19 pandemic and a short-lived price war between Saudi Arabia and Russia.
“The great coronavirus derigging kicked off mid to late in the first quarter, impacting well starts across the major U.S. oil shale plays,” analysts at Enverus Rig Analytics said, noting the rig count was down 38% in April and 62% over the last year, reports Reuters.
The projections going forward are bleak, with analysts expecting companies to continue to pull rigs for the rest of 2020. Investment Bank Raymond James expects an average of just 225 operating rigs in 2021.
In Canada, the rig count fell to just 26 rigs about two weeks ago, according to Baker Hughes, one of the world’s largest oil field services companies.
