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Crude Oil Rig Counts Fall Again: More Pain for Oil Producers

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US crude oil rig counts fall again 

Last week, Baker Hughes published its weekly crude oil rig count report on September 25, 2015. The active US crude oil rig count fell for the fourth consecutive week for the week ending September 25, 2015. The data showed that the US crude oil rig count fell by four to 640 for the week ending September 18, 2015. Likewise, the oil rig count fell by eight to 644 for the week ending September 18, 2015.

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Why are the crude oil rigs falling?

The long-term lower crude oil prices, due to oversupply concerns, led to the fall in the drilling activity. The drilling activity is the barometer of US oil producers’ confidence. The fall in the drilling activity implies the oil producers are less confident about higher oil prices in the future. As a result, it impacts oil drillers like Schlumberger (SLB), Superior (SPN), and Halliburton (HAL). It also impacts oil and gas ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Select Sector SPDR Fund ETF (XLE).

The current crude oil rig counts are 951 rigs lower than 1,592 rigs during the same period last year. The US crude oil drilling activity fell almost 60% from the peak of 1,609 in October 2014 to 628 in June 2015. So, we can anticipate another fall in the US production due to the high cost of production from the US compared to the Middle East and lower crude oil prices. During the US slow down period, we saw a rise in production from Angola, Iran, Iraq, and African nations. These countries could balance the slowing US production. There’s a surplus of 2 MMbpd of crude oil in 2015. It could narrow down to 1 MMbpd in 2016, according to EIA (U.S. Energy Information Administration) sources.

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