Fewer Rigs, More Oil: The Math Behind Three Years Of Cuts

The U.S. rig count just posted its second straight weekly gain. It’s still down 29 percent from where it stood at the end of 2022, and crude production has never been higher.

Baker Hughes counted 580 active U.S. rigs on July 2, up seven from the week before and the second consecutive weekly increase. Oil-directed rigs rose by five to 445. Gas rigs added one, reaching 126. The total sits 41 rigs above the same week in 2025.

Two weeks of gains do not undo three years of cuts. The oil and gas rig count fell 20 percent in 2023 and another 5 percent in 2024, driven by companies that chose to return cash to shareholders and pay down debt rather than drill more wells at lower prices. In the Permian Basin, the country’s largest oil field, the rig count has dropped 29 percent since December 2022.

Production Kept Climbing Anyway

Fewer rigs did not mean less oil. Lower 48 crude production hit a monthly record of 11.4 million barrels a day in July 2025, according to the Energy Information Administration. Natural gas production set its own record the following month, at 117.2 billion cubic feet a day. The EIA’s November 2025 analysis found that Permian oil output rose 18 percent, or 1 million barrels a day, over the same period the region’s rig count fell 29 percent.

The gap closes with longer laterals and better completions. Operators are drilling wells that reach farther underground and using completion techniques that extract more from each one, so a single rig now produces what used to take two or three. Appalachia shows the same pattern on the gas side: rigs down 29 percent, production up 10 percent, or 3.3 billion cubic feet a day, after output had stalled in 2024.

What Changed This Summer

The incentives built up over the past year. The EIA’s 2025 outlook had projected crude output at 13.4 million barrels a day for the year, up from a record 13.2 million in 2024, even as most forecasters expected oil prices to fall for a third straight year. Gas producers had a clearer reason to add rigs: the same outlook projected an 88 percent jump in spot gas prices for 2025, a sharp reversal after a 14 percent price drop in 2024 cut output for the first time since the pandemic.

That incentive showed up unevenly on the ground before this month’s increase. Texas drilling permit applications fell to a four-year low in April, according to Enverus, with operators submitting 570 new applications, down from 795 in March and the fewest since February 2021. Diamondback Energy said it would drop three rigs in the second quarter. Coterra Energy cut three rigs from its Permian program. Matador Resources dropped one rig by mid-year. Those were decisions made when oil prices looked shakier than they do now.

The Permian remains the center of gravity regardless of the weekly count. It carries 256 active rigs, more than any other basin, even after shedding five rigs the same week national activity rose. Oklahoma held steady at 48. The Williston Basin in North Dakota and Montana was unchanged at 27.

What the Count Actually Predicts

The rig count matters because it leads production by months, not because it measures output directly. A rig added today shows up in flow rates well into next year. Two weeks of increases suggest producers are responding to firmer prices after a stretch of caution, but the three-year decline in rig count alongside record production is the more durable story: the same or greater output now needs meaningfully less drilling to produce it. Whether the recent uptick holds depends on where oil prices settle over the next few months, and on whether producers see it as the start of a cycle or a temporary response to a good week.

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