U.S. Rig Count – Up on Economic and Geopolitical News.

We’ve all seen the price at the pump. There’s a geopolitical hiccup in the global energy supply chain and the world is reacting. Here at home, the U.S. energy market is reacting too. Albeit, not as fast as some economists would like.

For the ninth time in the last 10 weeks, U.S. energy firms added rigs according to Baker Hughes, a global oilfield services firm. The weekly Baker Hughes rig count serves as a barometer for the oil and gas industry. Increases and/or decreases of active oil & natural gas rigs featured in this report are an early indicator of future output from the energy industry.

Last week, the count rose by 13 to 663, up 261 rigs, or 65%, compared to the same time period last year. A total of 663 rigs represents the highest U.S. total since April 2020. U.S. oil rigs rose eight to 527 this week, while gas rigs gained five to settle at 135, their highest since October 2019. U.S. crude futures were trading near $130 per barrel last week, their highest since July 2008 as the Russian invasion of Ukraine stoked global energy supply concerns (Prices have since settled back to near $100 per barrel as of this article).

Even though the rig count has climbed for a record 19 months in a row, the weekly increases have predominately been in the single digits. As the economy has begun to bounce back from the COVID 19 pandemic, drilling projects have also begun to come back online. Still, production remains far from pre-pandemic record levels as publicly-traded energy companies focus more on returning money to investors rather than boosting output and replenishing reserves.

According to federal energy data, U.S. crude production was on track to rise from 11.2 million barrels per day (bpd) in 2021 to 12.0 million bpd in 2022 and 13.0 million bpd in 2023. That compares with a record 12.3 million bpd in 2019. With oil prices up about 44% so far this year after soaring 55% in 2021, a growing number of energy firms said they plan to boost CapEx spending for the second year in a row, after drastically reducing expenditures in 2019 and early 2020.

Still, certain headwinds still exist for shale projects. Supply chain disruptions for specific oilfield materials and equipment used in hydraulic fracking have impacted shale plays. Shortages of materials and technology used in these projects have prevented/postponed any sort of “2022 Shale Boom” for the foreseeable future. In addition, well-publicized labor shortages in key shale basins present additional issues for oil companies when planning to resume drilling and completion activities.

For U.S. electrical distributors who support oil & gas firms, these economic and geopolitical conditions will likely spell an eventual uptick in the number of quotes for electrical components, supplies, and services from the oil gas sector. With strong crude pricing, additional drilling and completion projects that were suspended during the last 48 months will become active once again. All this points to a potential return to better days for specific electrical wholesalers who supply electrical products for oil & gas drilling, production, transportation, and processing.

The collective hope from the West is for peace in Ukraine and lasting stability in the region. With volatility reduced and a return to steadiness among energy markets, U.S. producers can bring back some supply-side consistency for an energy-dependent economy. In the meantime, our thoughts are with the Ukrainian people and those affected by the conflict in the region.