Weekly Oil Rig Count Falls, Crude Prices Edge Down Amid Sanction Risks

The U.S. oil and gas industry witnessed a decline in the number of active drilling rigs this week, according to data released by Baker Hughes on Friday. The total rig count fell by four to 580, the lowest level since December 2021. This decrease comes on the heels of a 5-rig drop the previous week. The number of oil rigs specifically fell by two to 478, also the lowest since November 2024.



The decline in rigs is part of a broader trend in the U.S. energy sector, with the oil and gas rig count having declined by about 5% in 2024 and 20% in 2023. This trend is attributed to lower U.S. oil and gas prices, which have prompted energy firms to focus more on paying down debt and boosting shareholder returns rather than raising output.

The decrease in rigs is expected to impact crude production in both the short and long term. In the short term, the U.S. Energy Information Administration (EIA) reported that weekly U.S. crude oil production for the week ending January 10, 2025, dipped to 13.481 million barrels per day (bpd), from 13.563 million bpd in the previous week. The EIA's Short-Term Energy Outlook (STEO) projects that crude oil production will rise from a record 13.2 million bpd in 2024 to around 13.6 million bpd in 2025, indicating a slowdown in production growth.

In the long term, analysts forecast U.S. spot crude prices to decline for a third year in a row in 2025, which could lead to further reductions in drilling activity and a continued slowdown in crude oil production growth. However, the EIA projects that crude oil production will still increase in the long term, reaching around 13.6 million bpd in 2025.

Meanwhile, crude oil prices have been edging down amid concerns over potential supply disruptions due to sanctions on Russian oil exports. The G7 price cap on Russian oil, which limits the price of Russian crude oil to $60 per barrel, is expected to influence India's purchasing decisions. India, being one of the largest buyers of Russian oil, may face difficulties in finding alternative suppliers willing to sell at the capped price. The cap may also lead to a reduction in the quantity of Russian oil available for export, as Russia may choose to redirect its oil to other markets where it can fetch a higher price. Additionally, the cap may lead to an increase in the price of Russian oil in the global market, as Russia may try to offset the loss of revenue by increasing the price of its oil in other markets.



In conclusion, the decline in U.S. oil rigs is expected to impact crude production in both the short and long term, while crude oil prices have been edging down amid concerns over potential supply disruptions due to sanctions on Russian oil exports. The G7 price cap on Russian oil is expected to influence India's purchasing decisions, potentially leading to difficulties in finding alternative suppliers and a reduction in the quantity of Russian oil available for export.