Active US crude oil and natural gas rigs at their lowest point

The number of active rigs began sharply decreasing in mid-March as crude oil prices fell: rigs have fallen by 56% (433 rigs) since March 17. Most of the decrease was in oil-focused geologic plays, but natural gas-focused plays also saw significant decreases.

Since March 17, 71% (308 rigs) of the rigs taken out of service were in the top three US crude oil-producing regions:

• The Permian region in southeastern New Mexico and western Texas
• The Eagle Ford region in southern Texas
• The Bakken region in Montana and North Dakota.

Drilling in oil-focused plays has declined as the impact of mitigation efforts for COVID-19 have caused declines in petroleum demand and the resulting fall in crude oil prices. In mid-March, the Permian region had 405 operating rigs. By May 12, that number had fallen by 57% to 175 rigs. The Eagle Ford and Bakken regions saw similar declines in their rig counts, of 64% and 69%, respectively, at that time.

Rig counts have also reduced in natural gas-focused plays, although those plays had fewer rigs. Earlier this year, the top natural gas-producing regions were the Marcellus region in Ohio, Pennsylvania, and West Virginia and the Haynesville region in Louisiana and Texas. Drilling rigs in the Marcellus and Haynesville regions, which are exclusively natural gas rigs, fell by 23% and 26%, respectively, from mid-March to May 12.

Moreover, the rig count began to decrease sharply in mid-March. The quick reduction in active rigs reflects the sudden loss of petroleum demand related to coronavirus-related mitigation efforts that also resulted in recent increases in the amount of crude oil placed in storage.

Similarly, natural gas rig activity has decreased along with the natural gas price. However, the decrease in natural gas prices has been over a longer period than oil prices; natural gas prices were already at multi-year lows in early 2020. Record-high dry natural gas production in November 2019, low demand because of warm weather, and relatively small withdrawals from storage during the winter heating season (November 1–March 31) have led to a sustained decrease in the natural gas price.