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Crude Oil Rig Count: Will It Fuel Optimism in the Crude Oil Market?

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Crude oil rig count 

The active crude oil rig count fell by 97 in the last consecutive nine weeks for the week ending October 30, 2015. Baker Hughes (BHI) will release the weekly active US crude oil rig count report on November 6, 2015. Last week, the crude oil rig count fell by 16 to 578 for the week ending October 30, 2015—the lowest level since June 2010.

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Impact 

Last week, crude oil rigs fell by 16 rigs to hit lows seen in 2010. Crude oil prices rose on the speculation of slowing US production over the long term. Prices rose almost 5% from October 26–30, 2015. If crude oil rigs fall for the week ending November 6, 2015, we could see oil prices rise.

The US active crude oil rig counts peaked at 1,609 in October 2014. They fell to the lowest level of 578 in October 2015 due to the catastrophic fall in crude oil prices. The prices fell almost 60% due to oversupply concerns. Despite the fall in oil prices, oil producers like Apache (APA), Devon Energy (DVN), and Oasis Petroleum (OAS) increased their crude oil production 2015. The rise in the drilling activity could benefit drillers like Baker Hughes, Schlumberger (SLB), Superior (SPN), and Halliburton (HAL).

Oil producers are increasing the production due to improving efficiencies in oil drilling activity, falling drilling costs, and falling break-even costs in the US shale regions. It implies that oil producers will continue to produce more oil to offset lower crude oil prices. So, crude oil prices could fall if companies continue to produce more oil. The uncertainty in the oil market impacts ETFs like the iShares US Oil Equipment & Services ETF (IEZ) and the PowerShares DWA Energy Momentum ETF (PXI).

In the next part of this series, we’ll discuss the crude oil price trend.

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