The declining number of rigs in the US is overtaking efficiency gains. How will this affect oil

The dwindling number of oil and gas rigs deployed in the United States is reaching a level that would mean onshore crude oil output from the world’s largest producer could fall as early as 2026.

U.S. energy companies are producing record amounts of oil, much of it from onshore shale deposits. New techniques and technologies, such as longer lateral wells, automation and more powerful equipment, have led to productivity gains across the industry, allowing oil companies to pump more with fewer rigs and less capital.

But the number of operating rigs in U.S. shale fields has fallen almost so low — and is expected to continue to decline — that these improvements will not be enough to keep onshore U.S. production growing or even stable in some basins, analysts say.

The expected decline comes as US President Donald Trump seeks to boost oil and gas output and OPEC+ raises its production targets in an attempt to regain market share from the US and other rival producers.

In April 2019, the last time more than 1,000 rigs were permanently deployed in the U.S., oil production was 12.14 million barrels per day (bpd). Today, just 540 rigs are in operation, while production has jumped to about 13.5 million bpd.

Industry insiders say the balance is rapidly approaching a tipping point, with analysts predicting that the rig count will decline further and onshore production in the US will subsequently decline next year and into 2027.

Lower 48 oil production is expected to fall by 200,000 barrels per day next year, followed by a further decline of 130,000 barrels per day in 2027, as operators abandon rigs in response to persistently low oil prices, Wood Mackenzie analysts said.

With the current rig count of 540, energy analytics firm Novi Labs is forecasting a 400,000-barrel-per-day decline in Lower 48 production by the end of next year, with losses of more than 200,000 barrels per day in the first few months of 2026.

Markets firm Energy Aspects expects the Permian rig count to continue to decline, falling below its own modeled threshold of 255 for stable production early next year. Consulting firm Wood Mackenzie predicts the rig count in the basin will fall to 245 by early 2026 as prices fall due to higher OPEC+ output.

A July note from Morgan Stanley analysts said oil production per cubic meter of production has fallen 8% so far in 2025 compared to last year’s average.

“If the decline in the number of drilling rigs does not reverse soon, we will see a decline in US production as late as 2026, including in the Permian Basin,” said Energy Aspects analyst Jesse Jones. He expects production in the Permian Basin, which is currently 6.55 million barrels per day, to fall by 150,000 barrels per day to 6.25 million barrels per day in 2026 due to fewer drilling and completions, as well as deteriorating well productivity.