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US rig count saw steepest decline since March 2009

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US total rig count decreased

According to oilfield service company Baker Hughes (BHI), there were 1,750 active oil and gas rigs in the US during the week ending January 9. That’s 61 less than in the week ending January 2. It was the biggest decline in the US rig count since March 2009.

The US rig count was generally on an uptrend in 2014. Occasionally, it was marred by a decline. However, a fall in the rig count for five consecutive weeks shows that US rigs are losing strength. This was also the ninth rig count decrease in the past 15 weeks.

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This week’s rig count drop was the highest decrease in the rig count since crude oil’s price started to tumble. Now, the US rig count is at the lowest level since November 1, 2013. Last week, the fall was led by a steep fall in the onshore rig count. Read Part 6 of this series to learn more about the onshore rig count.

According to Baker Hughes, on a monthly basis, December’s average rig count of 1,882 declined by 43—from November’s average of 1,925. September’s average rig count of 1,931 was the highest US rig count since July 2012.

Why rigs decreased last week

Last week’s decrease was due to a fall in oil rigs. Oil rigs decreased by 61. The fall was partially offset by a steady natural gas rig count. Read the next part of this series to see how a fall in oil prices triggered the decline in the oil rig count.

In the past year, the total US rig count has gone down by four. Oil rigs increased by 28—or 2%. Natural gas rigs decreased by 28—or ~8%. Last week, miscellaneous rigs decreased by one.

Total rigs decreased by seven for the same period ending January 10, 2014.

Rig count trends show companies’ inclination to spend on drilling

Rig counts tell us how many rigs are actively drilling for oil and gas. This shows oil and gas producers’ confidence. Companies in the drilling environment include Hess Corporation (HES) and Chesapeake Energy (CHK). 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 Halliburton (HAL)—use the rig count to gauge the industry’s health. Halliburton is part of the SPDR S&P 500 ETF (SPY).

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