Crude oil rig count rose by 32 in the last three weeks
Last week, Baker Hughes published the weekly crude oil rig count report on August 7, 2015. The data showed that active US crude oil rigs rose by six to 670 for the week ending August 7, 2015. Likewise, crude oil rigs rose by five to 664 for the week ending July 31, 2015. The active US crude oil rig count rose for the third consecutive week. Over this period, they rose by 32 rigs. In contrasts, crude oil rigs fell in 30 of the last 35 weeks. Currently, crude oil rigs are 57.80% lower than the level of 1,588 rigs last year.
Impact on crude oil prices
The recent surge in crude oil rigs will increase the drilling activity. The increase in drilling activity benefits oil equipment companies like Schlumberger (SLB), Superior (SPN), and Halliburton (HAL). The rise in production will put downward pressure on crude oil prices in the oversupplied crude oil market. As a result, oil producers might keep the high-cost wells idled. This could narrow the supply and demand imbalance in the long term. This may support crude oil prices and ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Select Sector SPDR Fund ETF (XLE).
The US drilling activity fell more than 60% from the peak of 1,609 in October 2014 to 628 in June 2015. The fall in drilling activity was due to the fall in oil prices. Crude oil prices fell more than 55% since the mid-week of June 2014. Prices fell almost 30% since the May 2015 peak due to oversupply and slowing demand concerns. Lower crude oil prices may continue to slow down drilling activity.