Stop following the rig count!

The Gist (1) Agency forecasts call for another year of rising U.S. production in 2025. (2) Less widely followed hard data such as weekly hours worked in the oil patch as well as durable goods data points to a decline. (3) Recent survey data out of the Dallas Fed points to a decline in production as well.

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To the casual observer, the rig count is often seen as the most widely tracked metric, with the assumption that more rigs equate to higher production and fewer rigs mean less. However, as the chart below demonstrates, this relationship has clearly not held true.

A less frequently tracked data point comes to us from the BLS monthly payroll report, but it leads to the same observation: increased production has been achieved on a lower headcount.

Yet one metric that has not lost its value is average weekly hours worked in the oil & gas patch. As the chart below shows, industry will cut average weekly hours coincident with a slowing in production growth.