Oil drillers in the United States have made the largest reduction in active rigs in nearly two years, signaling a continued slowdown in the industry, according to a report by Reuters on Friday.

The data from energy analytics and data firm Baker Hughes reveals that the number of active oil and gas rigs decreased by 15 this week, bringing the total to 696. This decline represents the most significant weekly drop since September 2021 and pushes the number of active rigs to its lowest level since April 2022. The past five weeks have witnessed consecutive declines in active drill sites, with May experiencing the most substantial monthly slide in oil rigs since June 2020. Consequently, the total number of shutdowns has reached 59 since the start of this downturn.

Baker Hughes also reported a 4% decrease in the overall number of rigs compared to the same period last year. Drillers have been scaling back operations in recent weeks due to declining oil prices resulting from investors’ concerns about an impending economic downturn, as well as rising input costs, as cited by Reuters.

The slowdown in industrial demand, particularly in Western regions, has contributed to the persistent decrease in prices. Doug King, the CEO of British commodities trading firm RCMA Capital, highlighted this factor as a significant influence on the declining prices, as stated in The Wall Street Journal.

Among the rigs that were shut down this week, all were oil rigs. Consequently, the total number of active oil rigs has fallen to 555, while the number of active gas rigs remains steady at 137, according to Reuters.

Analysts at energy consulting firm EBW Analytics mentioned in a note this week, reported by Reuters, that many gas drillers are closely monitoring the anticipated boom in liquefied natural gas (LNG) demand over the next 30 months. Consequently, they are hesitant to reduce productive capacity.

On Friday, the Biden administration announced a 20-year pause on all new drilling within a 10-mile radius of a historical Native American site in New Mexico. However, existing rigs are allowed to continue operations. Following record-breaking profits for oil and gas companies in 2022, which drew criticism from President Biden, some industry analysts expected larger energy firms to utilize these profits to acquire smaller firms, thereby strengthening production capabilities for a future upturn, even as they temporarily shut down rigs.