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US Crude Oil Rig Count Hit a 5-Year Low

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Crude oil rig count

On October 23, 2015, Baker Hughes (BHI) published its weekly crude oil rig count report. The data highlighted that the US active crude oil rig count fell by one to 594 for the week ending October 23, 2015. Last week, crude oil rigs fell by 11 to 595 for the week ending October 16. Crude oil rigs fell for the eighth consecutive week for the week ending October 23, 2015.

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Impact 

The active US crude oil rigs have fallen by 81 in the past eight weeks. The US drilling activity fell due to the mammoth fall in the crude oil prices. Crude oil prices fell due to record production from non-OPEC (Organization of the Petroleum Exporting Countries) countries like Russia and the US as well as OPEC countries like Saudi Arabia and Iraq. The active US crude oil rigs fell by 1,001 from 1,595 to 594 as of October 23, 2015. This is the lowest level since July 2014. Currently, crude oil rigs have fallen 60% from the levels last year. The falling drilling activity impacts oil and gas drilling companies like Baker Hughes, Schlumberger (SLB), and Halliburton (HAL). They also affect ETFs like the iShares US Oil Equipment & Services ETF (IEZ).

The US crude oil rig counts fell from the peak of 1,609 in October 2014. They hit a new low of 594 on October 23. However, US crude oil production is still more than the levels last year due to improving productivity and better planning in the low-cost wells. Some oil producers are scaling up production due to lower drilling costs in low-cost wells. However, high-cost US shale wells have been idled.

The EIA (U.S. Energy Information Administration) released its monthly drilling report on October 13, 2015. The report projected that the crude oil production will fall in the US shale region by 93,000 bpd (barrels per day) in November—compared to October 2015. The Bakken, Eagle Ford, and Niobrara shales will influence the fall in production. The lower production estimates suggest that US crude oil rigs and production could fall more.

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

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