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Crude Oil Rig Count Falls: Saudi Arabia Plans Massive Output

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Crude oil rig count falls again

Baker Hughes (BHI) releases the weekly US oil and gas rig count report every Friday. The report is expected to release today. Last week, Baker Hughes reported that the oil rig count fell for the 27th straight week. The crude oil rig count fell by seven to 635 for the week ending June 12, 2015. Currently, crude oil rigs are 59% lower than oil rig count of 1,536 in 2014. The massive fall in crude oil rigs was a result due to long-term lower crude oil prices. This was a result of oil glut.

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The recent rise in crude oil prices could benefit oil drillers like Schlumberger (SLB), Baker Hughes, and Halliburton (HAL). Higher oil prices boost oil producers’ confidence and promote more drilling activity. Higher oil prices benefit ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Select Sector SPDR Fund ETF (XLE). This signals that the oil rig count could slow down with rising oil prices.

EIA report and Saudi Arabia

The EIA (U.S. Energy Information Administration) reported that crude oil stocks fell by 2.7 MMbbls (million barrels) to 467.9 MMbbls for the week ending June 12, 2015. Slowing crude oil stocks support oil prices. In contrast, oversupplied crude oil markets might put pressure on oil prices. Saudi Arabia’s massive production plans could push crude oil prices even lower.

Saudi Arabia is the largest crude oil exporter. It’s expected to raise its crude oil production from 10.3 MMbpd in May 2015 to 11 MMbpd in the 2H15, according to Citigroup estimates. The oil market would be flooded with more oil. Not only oil, even the consensus of the appreciating US dollar will put pressure on crude oil prices.

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