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US rig count continued to slide last week

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US total rig count decreases

According to oilfield service company Baker Hughes (BHI), there were 1,811 active oil and gas rigs in the US during the week ending January 2, 2015. That’s 29 fewer than in the week ending December 26, 2014, and it was the second biggest decline in the US rig count in the past 21 months.

The US rig count has generally been on an uptrend in 2014, marred by the occasional decline. However, a rig count fall for four consecutive weeks shows that US rigs are losing strength. This was also the eighth rig count decrease in the past 14 weeks.

This week’s rig count drop follows one of the highest decreases in rig count in the past week, and the US rig count is now the lowest since March 28, 2014.

On a monthly basis, December’s average rig count of 1,882 declined by 43 from November’s average of 1,925, according to BHI. September’s average rig count of 1,931 was the highest US rig count since July 2012.

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Why rigs decreased last week

Last week’s decrease resulted from a fall in both oil and natural gas rigs, which decreased by 17 and 12 in the week, respectively. Read the next part of this series to see how a fall in oil prices triggered an oil rig count decline.

In the past year, the total US rig count was up by 60, or ~3%. Oil rigs increased by 104, up 8%, and natural gas rigs decreased by 44, or ~12%. In the same period in 2013, total rigs increased by 11.

Rig count trends show companies’ inclination to spend on drilling

Rig counts tell us how many rigs are actively drilling for oil and gas, which indicates oil and gas producers’ confidence. Companies in the drilling environment include Hess Corporation (HES) and Concho Resources (CXO). These companies are part of the Energy Select Sector SPDR ETF (XLE).

The rig count is one measure of oil and gas drilling activity. Oilfield service companies like Baker Hughes (BHI) use the rig count to gauge industry health. BHI is part of the VanEck Vectors Oil Services ETF (OIH) and the SPDR S&P 500 ETF (SPY).

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