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Is $60 Coming for US Crude Oil?

PART:
1 2 3 4 5
Part 2
Is $60 Coming for US Crude Oil? PART 2 OF 5

Why the Oil Rig Count Is a Bullish Factor for Oil Traders

The oil rig count

In the week ended October 20, 2017, the US oil rig count fell by seven to 736. The US oil rig count has fallen by 32 in the last ten weeks since August 11, 2017. Over this time period, US crude oil prices rose by 7.5%. The fall in the US oil rig count could be one of the factors behind oil’s rise.

Why the Oil Rig Count Is a Bullish Factor for Oil Traders

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Oil prices and the rig count

In the past ten years, the US oil rig count has broadly followed US crude prices with a three to six month lag. For example, on February 11, 2016, US crude oil futures plunged to their 12-year low. In a period of just over three months, the US oil rig count fell to its lowest since October 30, 2009.

Between February 11, 2016, and October 24, 2017, US crude oil (UCO) (OIIL) (DBO) futures have more than doubled. Since the low of 316, on May 27, 2016, to date, the oil rig count has almost doubled.

US crude oil futures hit a 2017 high on February 23, 2017. Based on the same price and rig count pattern, the oil rig count could have topped out in August 2017. In fact, in the week ended August 11, 2017, the oil rig count was 768, more than its two-year high. Since then, it has not gone above that. In fact, it fell from that level as discussed earlier.

Apart from the oil rig count itself, the new-well oil production per rig could fall 1% in November 2017 on a month-over-month basis. These factors could push energy ETFs like the Fidelity MSCI Energy ETF (FENY) and the Energy Select Sector SPDR ETF (XLE) higher.

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