(Reuters) - U.S. energy firms this week cut the number of oil and natural gas rigs operating to their lowest since January, energy services firm Baker Hughes ( BKR ) said in its closely followed report on Friday.

The oil and gas rig count, an early indicator of future output, fell by six to 578 in the week to May 9.

Baker Hughes ( BKR ) said this week's decline puts the total rig count down 25, or 4% below this time last year.

Baker Hughes ( BKR ) said oil rigs fell by five to 474 this week, their lowest since January, while gas rigs were unchanged at 101.

The oil and gas rig count declined by about 5% in 2024 and 20% in 2023 as lower U.S. oil and gas prices over the past couple of years prompted energy firms to focus more on boosting shareholder returns and paying down debt rather than increasing output.

Even though analysts forecast oil prices would decline for a third year in a row in 2025, the U.S. Energy Information Administration (EIA) this week projected crude output would rise from a record 13.2 million barrels per day (bpd) in 2024 to around 13.4 million bpd in 2025.

That increase in production, however, was lower than the EIA's outlook in April due to lower oil price forecasts as U.S. tariffs increase the chances of weaker global economic growth and oil demand.

On the gas side, the EIA projected an 88% increase in spot gas prices in 2025 would prompt producers to boost drilling activity this year after a 14% price drop in 2024 caused several energy firms to cut output for the first time since the COVID-19 pandemic reduced demand for the fuel in 2020. [NGAS/POLL]

The EIA projected gas output would rise to 104.9 billion cubic feet per day (bcfd) in 2025, up from 103.2 bcfd in 2024 and a record 103.6 bcfd in 2023.

Oil and gas drilling permit applications in Texas, the top U.S. oil-producing state, hit a four-year low in April amid concerns that rising OPEC+ supplies and a trade war will continue to hit crude prices, consultancy Enverus said on Thursday.

Operators in Texas submitted 570 new drilling permit applications in April, down from 795 in March and the lowest number since February 2021, according to Enverus.

Shale producer Diamondback said on Monday it will drop three rigs in the second quarter, and could reduce activity further if oil prices fall more. Rival Coterra Energy is reducing its 2025 Permian activity by three rigs, while producer Matador Resources is dropping one drilling rig by the middle of 2025.