Crude Oil Rig Count: Will It Fall for the Seventh Consecutive Week?



Crude oil rig count falls 

Baker Hughes (BHI) releases its weekly crude oil rig count report every Friday. The report is scheduled to release on October 16, 2015. Last week, Baker Hughes reported that the active crude oil rig count fell by eight to 606 for the week ending October 9, 2015. In the last six weeks, US crude oil rigs fell by 70 for the week ending October 9, 2015. The active US crude oil rig count fell for the sixth consecutive week for the same period. As of October 9, 2015, the US crude oil rig count hit the lowest level since July 2010. The bearish momentum could also drag crude oil rigs this week.

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Why are crude oil rigs falling? 

Crude oil prices fell almost 50% since June 2014. The prices fell due to oversupply concerns. The concerns were a result of the mammoth production from the Middle East to the US. The fall in the crude oil prices led to the fall in the drilling activity. The US crude oil rig counts fell from the peak of 1,609 in October 2014 to the fresh low of 606 on October 9, 2015. The fall in drilling activity negatively impacts oil drillers like Schlumberger (SLB), Noble (NE), and Halliburton (HAL). ETFs like the iShares U.S. Oil Equipment & Services (IEZ) are also impacted by falling crude oil prices.

Currently, the crude oil rig counts are 1,003 rigs lower than 1,609 rigs last year. The US crude oil rig count fell by 60% since June 2014. However, the US crude oil production rose 3% during this period. It suggests that the productivity is improving. Also, lower drilling costs are driving oil producers to produce more oil.

Monthly drilling report  

The EIA (U.S. Energy Information Administration) published its monthly drilling productivity report on October 13, 2015. The report highlighted that the US crude oil output is expected to fall in the US shale region by 93,000 bpd (barrels per day) in November 2015—compared to October 2015. The Bakken, Eagle Ford, and Niobrara shale regions will contribute to the fall in production in the US. It suggests that we could see more crude oil rigs idled due to falling crude oil prices. The falling US production could benefit crude oil prices.

The roller coaster ride of the crude oil market impacts ETFs like the Vanguard Energy ETF (VDE) and the ProShares UltraShort Bloomberg Crude Oil ETF (SCO).


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