Crude oil rig count
Baker Hughes will publish the weekly crude oil rig count report on September 18, 2015. Last week, Baker Hughes reported that the active crude oil rig count fell by ten to 652 for the week ending September 11, 2015. Similarly, US crude oil rigs fell by 13 to 662 for the week ending September 4, 2015. The crude oil rig count fell for the second straight week in the last eight weeks.
Impact of falling crude oil rigs
Currently, US crude oil rigs are 60% lower than the level in 2014. The current rigs are 940 rigs lower than 1,584 rigs in 2014. Crude oil rigs fell due to lower crude oil prices. Crude oil prices fell due to oversupply concerns. Prices fell more than 50% from the peak of $107 per barrel since June 2014.
The recent fall in crude oil rigs implies that oil producers are less confident about the higher oil prices. The slowing drilling activity will negatively impact oil drillers like Schlumberger (SLB), Superior (SPN), and Halliburton (HAL). However, the fall in crude oil rigs has only marginally slowed down the US production. The US crude oil production is at record levels. This implies that crude oil rigs are becoming more productive. The improving productivity means a lower cost of production per well. The long-term falling crude oil prices have also led to a fall in the new lower cost drilling contracts.
As a result, improving productivity and the lower cost of drilling could also increase production and extend the crude oil glut market. The only option left for crude oil producers is to produce more with low-cost wells in order to sustain in the market. This will increase production.