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Is It the Beginning of a Bear Market for Crude Oil?

PART:
1 2 3 4 5 6 7
Part 6
Is It the Beginning of a Bear Market for Crude Oil? PART 6 OF 7

US Crude Oil Rig Count Hit an 18-Month High

US crude oil rig count  

Baker Hughes (BHI) reported that the US crude oil rig count rose by 14 to 631 rigs from March 10–17, 2017. The US crude oil rig count has risen 34 times in the last 37 weeks. US crude oil rigs are at the highest level since September 2015.

The US crude oil rig count has risen 2.3% week-over-week and 63% YoY (year-over-year). The rigs rose as crude oil (XES) (IEZ) (USO) prices recovered from the lows in early 2016. The rise in the crude oil rig count could increase US crude oil production and pressure crude oil prices in 2017. For more on crude oil prices, read Part 1 and Part 4 of this series.

US Crude Oil Rig Count Hit an 18-Month High

US Crude Oil Rig Count Hit an 18-Month High

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Successful implementation of President Trump’s energy policies could also increase US drilling activity. It would be reflected in a higher number of active rigs.

Moves in crude oil (USL) (SCO) (VDE) and natural gas (BOIL) (UNG) (DGAZ) prices also impact oil producers and drillers. A rise in US drilling activity would increase US crude oil production. In the short term, it would have a positive impact on companies’ earnings such as Schlumberger (SLB), Whiting Petroleum (WLL), Marathon Oil (MRO), Diamond Offshore (DO), Atwood Oceanics (ATW), Rowan Companies (RDC), Halliburton (HAL), and Noble Energy (NBL).

Peaks and lows  

The US crude oil rig count peaked at 1,609 in October 2014. In contrast, it hit 316 in the week ending on May 27, 2016—its lowest level since the 1940s.

US drilling activity fell due to lower crude oil prices, which were the result of oversupply. The US crude oil rig count has risen ~99.7% from its lows in May 2016. As of March 17, 2017, crude oil prices have risen ~88.1% from their 2016 lows.

EIA’s monthly drilling report 

The EIA (U.S. Energy Information Administration) released its monthly Drilling Productivity report on March 13, 2017. It estimates that US crude oil production will rise in the seven shale regions by 109,000 bpd (barrels per day) to 4,962, 000 bpd in April 2017—compared to the previous month. It would be the highest level since March 2016. Production is expected to rise mainly in the Permian and Eagle Ford Shale regions during this period. Technical advancement and improving productivity led to the rise in production in US shale regions.

In the last part of this series, we’ll take a look at some crude oil price forecasts.

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