uploads///US crude oil rig count  Aug

Will the Crude Oil Rig Count Rally for the Fifth Straight Week?


Aug. 21 2015, Published 9:06 a.m. ET

Crude oil rig count

Baker Hughes is scheduled to release the weekly US crude oil rig data on August 21, 2015. The data showed that the US crude oil rig count rose by two to 672 for the week ending August 14, 2015. The crude oil rig count in the US rose for the fourth straight week despite the bloodbath in crude oil prices. The active US crude oil rig count rose by 34 in the last month.

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US crude oil prices lost more than 60% from the peak of $107 per barrel in the mid-week of June 2014. Prices fell due to oversupply concerns. As a result, oil producers started slowing their drilling activity. The current crude oil rig counts are 57.70% lower than the levels in 2014. This negatively impacted oil drillers like Schlumberger (SLB), Superior (SPN), and Halliburton (HAL).

Lately, crude oil prices have fallen almost 30% since the peak of $62 per barrel in May 2015. However, over the last four weeks, the US crude oil rig counts have risen. The EIA’s (U.S. Energy Information Administration) monthly drilling report also suggests that the crude oil rig count will rise in September 2015.

The rise in the rig count could increase the crude oil production. However, the crude oil production has fallen for the fifth time in the last six weeks, according to the EIA’s estimates. This signals the lag effect between the crude oil price, production, and rig count.

It also indicates that the productivity per crude oil well is falling or crude oil production will rise more in the near future. In both situations, crude oil prices are going to experience pressure.

Long-term lower crude oil prices impact oil and gas ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Select Sector SPDR Fund ETF (XLE).


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