Why investors should monitor last week’s drop in oil rig count

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Aug. 18 2020, Updated 9:27 a.m. ET

Oil rig count crashed last week

Last week, the Baker Hughes oil rig count decreased by 19, from 1,609 to 1,590. The Mississippian Basin lost seven rigs last week, the Eagle Ford lost five, and the Granite Wash Basin lost four.U.S. Oil Rigs

This week’s fall in oil rig count marked the third decrease in the past four weeks, and the highest decrease since August 22’s fall. Despite the fall, the oil rig count is still close to its weekly highest count. The rig count touched 1,609 in the previous week, its highest since January 2005.

U.S. oil price and rig count

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Before the last fall, oil rigs experienced a temporary crash in the week ended August 22. If oil price continues to plummet, drillers will have fewer incentives. Oil prices below the “break-even” point would cause some riggers to stop or shut-down operations. Read part 8 of the series to learn more about oil rig’s relationship with crude oil price.

Since the beginning of 2014, the number of oil rigs has increased by 212, or ~15%. In comparison, oil rigs increased by 43 during the corresponding period last year. In 2014, activity in the oil-rich Permian Basin in western Texas drove most of the rig count increase. This region added 99 oil rigs.

Key stocks and ETFs

Some of the major oil and gas producers that increased their oil-targeted drilling activities include Hess Corporation (HES), Chevron Corporation (CVX), Halcon Resources Corp (HK), and Concho Resources (CXO). Some of these companies are part of the Energy Select SPDR ETF (XLE).

To learn more about oil and gas production and drilling in key shale plays, see Market Realist’s U.S. Energy Information Administration’s revised estimates on U.S. oil production.

The next article in this series will explain why U.S. gas-targeted rigs counts reversed.

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