U.S. energy firms this week cut the number of oil and natural gas rigs operating for a second week in a row to the lowest since December 2021, energy services firm Baker Hughes said in its closely followed report on Jan. 17.

The oil and gas rig count, an early indicator of future output, fell by four to 580 in the week to Jan. 17. 

Baker Hughes said this week's decline puts the total rig count down 40 rigs, or 6% below this time last year.

Baker Hughes said oil rigs fell by two to 478 this week, their lowest since November, while gas rigs also fell by two to 98, their lowest since September.

The oil and gas rig count declined by about 5% in 2024 and 20% in 2023 as lower U.S. oil and gas prices over the past couple of years prompted energy firms to focus more on paying down debt and boosting shareholder returns rather than raising output.

Even though analysts forecast U.S. spot crude prices could decline for a third year in a row in 2025, the U.S. Energy Information Administration (EIA) projected crude output would rise from a record 13.2 MMbbl/d in 2024 to around 13.6 MMbbl/d in 2025.

On the gas side, EIA projected a 43% increase in spot gas prices in 2025 would prompt producers to boost drilling activity this year after a 14% price drop in 2024 caused several energy firms to cut output for the first time since the COVID-19 pandemic reduced demand for the fuel in 2020.

EIA projected gas output would rise to 104.5 Bcf/d in 2025, up from 103.1 Bcf/d in 2024 and a record 103.6 Bcf/d in 2023.

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