US Oil Output Is Near A Record Even As Rig Count Tumbles | The Reason Why

US oil producers are pumping nearly 14 million barrels of crude a day, even as the number of active drilling rigs has fallen by more than 40% since December 2022.

The apparent contradiction points to a shift in how the US oil industry operates. Producers are drilling longer horizontal wells, completing them faster and extracting more crude from each rig. Policy changes have also reduced some costs and eased the approval process for energy projects.

The result has allowed the US to increase production and exports at a time when the closure of the Strait of Hormuz disrupted an estimated 8–10 million barrels per day of global oil supply.

US producers increased exports during the disruption, helping offset part of the supply loss. Experts cited in the source material said the additional American supply was one reason crude prices did not rise to $200 a barrel.

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More Oil, Fewer Rigs

US crude production has risen to nearly 14 million barrels per day, making the country the world's largest producer. Total petroleum liquids production exceeds 21 million barrels per day when natural gas liquids are included, almost twice Saudi Arabia's output.

The increase has also changed US oil trade.

Total petroleum net exports — including crude, refined fuels and other petroleum liquids — reached a record 6.3 million barrels per day during the disruption in the Strait of Hormuz. Crude imports, meanwhile, fell to record lows as domestic output increased.

But the number of rigs used to produce that oil has moved in the opposite direction.

The US had 780 active oil rigs in December 2022. That number has since fallen to 451. Crude production continued to increase over the same period.

The change means producers are extracting considerably more oil from each rig than they did three years ago.

Longer horizontal wells have played a central role.

Shale producers initially drill between one and three kilometres vertically to reach oil-bearing rock before turning the drill horizontally. Those horizontal sections previously extended about 7,000–9,000 feet. They now frequently stretch between 15,000 and 20,000 feet.

ExxonMobil drilled more than 80 wells measuring four miles in length during the first half of 2026 alone.

Longer wells expose a larger section of oil-bearing rock, allowing producers to extract more crude without drilling a corresponding number of additional wells.

Technology has also reduced drilling time by nearly six days per well. Producers are using artificial intelligence and machine learning in drilling and other processes.

The impact is visible in oil-company earnings.

ExxonMobil, Shell and Chevron reported second-quarter net profits that were two, three and four times higher, respectively, according to the source material. Together, the three companies earned more than $400 million a day during the quarter, almost three times the amount a year earlier.

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Policy Changes Lower Costs

Changes under the Trump administration have also lowered costs and sought to accelerate investment in oil and gas production.

The administration removed government-wide environmental review regulations and allowed individual agencies to establish their own approval processes. The change could shorten the approval process for energy projects.

It also reversed the Biden administration's pause on new liquefied natural gas export permits, authorising Venture Global to export to countries without free-trade agreements with the US through 2050.

The federal royalty rate on oil production was also reduced to 12.5% from 16.67%, lowering costs for producers.

Tax treatment of drilling expenses changed as well.

The One Big Beautiful Bill Act allowed companies to immediately deduct the full value of intangible drilling costs. These include wages, fuel, engineering, site preparation and drilling fluids that cannot be recovered after a well is completed.

Such expenses typically account for 60–80% of the cost of drilling a well. Companies previously had to deduct them over several years. They can now claim the entire deduction in the year in which they incur the expense.

The combination of higher productivity and lower costs has strengthened the US industry's ability to respond to disruptions in the global oil market.

That expansion has also drawn criticism. Environmental groups have opposed weaker environmental oversight and increased drilling.

For global oil markets, however, the shift means US producers can bring substantial volumes to the market without returning to the rig numbers previously required to achieve higher production.

That ability was tested when supplies through the Strait of Hormuz were disrupted. US producers were able to increase exports while domestic crude production remained near historic highs.

The transformation has taken the US from dependence on imported crude to the world's largest oil producer and a major supplier to Europe and Asia. Its capacity to increase supply quickly has also given the country's energy industry a larger role in global oil markets and US foreign policy.

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