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Crude Oil Could Be Getting Ready to Break Out

PART:
1 2 3 4
Part 2
Crude Oil Could Be Getting Ready to Break Out PART 2 OF 4

US Crude Oil Rig Count: Will Oil’s Gains Accelerate?

US crude oil rig count

On a week-over-week basis, the oil rig count fell by one to 764 for the week ending July 21, 2017. However, on a YoY (year-over-year) basis, the oil rig count has more than doubled. During this time, oil prices only rose 11%.

US Crude Oil Rig Count: Will Oil’s Gains Accelerate?

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On July 25, 2017, US crude oil (USL) (OIIL) (DBO) active futures were 55.4% less than their 2014 high. The oil rig count also fell 50.6% during this period. However, US crude oil production has fallen 1.9% since the record high of ~9.6 million barrels per day in the week ending June 5, 2015.

Trends in US crude oil production

Usually, US crude oil prices and the highs and lows in the US oil rig count occur with a gap of three to six months with oil prices moving first. On December 19, 2008, US crude oil active futures closed at $33.87 per barrel—the lowest closing price since February 11, 2004. In the week ending June 5, 2009, the oil rig count fell to 179—the lowest rig count since July 22, 2005.

On February 11, 2016, US oil prices settled at their 12-year low. Since then, oil prices have recovered 82.7%. The US oil rig count was at a multiyear low in the week ending May 27, 2016. Since the low of 316, the oil rig count has more than doubled. US crude oil production has risen 7.9% during this period.

Apart from the rising oil rig count, rig efficiency also increases oil supplies. Based on the EIA’s data, new oil production per rig could rise 27.8% in August 2017 on a YoY basis. US shale oil production could touch ~5.6 million barrels per day in August 2017—the highest since 2007.

The rising figures could be an important catalyst for ETFs such as the Fidelity MSCI Energy ETF (FENY) and the Energy Select Sector SPDR ETF (XLE).

The number of active US oil rigs consolidating in the last three weeks is an important factor for oil prices. If the level stalled or fell from here, it could accelerate the recent gains in oil prices.

In the next part, we’ll analyze US crude oil inventory data.

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