Sliding US rig count threatens shale oil output in 2026: Report

The falling number of oil and gas rigs deployed across the United States is reaching a level that would indicate onshore crude output from the world's top producer could fall in early 2026.

US energy companies are producing record amounts of oil, exceeding 13.5 million barrels per day (bpd), but the number of active rigs has declined to only about 540, compared to more than 1,000 rigs in 2019.

New techniques and technology, like longer lateral wells, automation, and more powerful equipment, have driven productivity gains across the industry that have allowed oil companies to pump more with fewer rigs and less capital, according to Reuters.

But the number of rigs working in US shale fields has almost fallen so low - and is projected to keep falling - that those improvements will not be enough to keep onshore US production rising, or even steady in some basins, analysts say.

US onshore oil production outside Alaska and the Gulf of Mexico is estimated to decline by up to 400,000 bpd by the end of next year, with initial declines of about 200,000 bpd expected in the first months of 2026.

Wood Mackenzie expects a decline of approximately 200,000 bpd in 2026, followed by a further decline in 2027.

The Permian Basin, which stretches from Texas to New Mexico, is a key component of this equation, with the number of drilling rigs declining to 259, the lowest level since September 2021.

Analysts believe that maintaining stable production in this basin requires operating at least 240 to 260 drilling rigs. The significant gains the sector has achieved in recent years through equipment upgrades are no longer replicable, as most existing rigs are already the most advanced and efficient.

Despite the increased capacity of drilling rigs to drill deeper and the increased proportion of long-stretch wells, the quality of the extracted rock has declined, negatively impacting well productivity, which now generates more gas and water and less oil.

Oil produced per foot drilled in the Permian Basin has fallen by 8% so far in 2025 compared to the average of last year, according to Morgan Stanley analysts.

Experts say the decline in production will not be immediate, typically appearing six to nine months after the rig count declines, due to the time lag between drilling and actual production.

However, consensus estimates suggest that a continuation of this trend will lead to a gradual and significant decline in US production over the next two years, even in the most active fields, such as those in the Permian Basin.