Crude oil rig count
The US crude oil rig count fell by 64% in 2015. This was the biggest drop in the US crude oil rig count in the last 30 years. On Thursday, December 31, 2015, Baker Hughes (BHI) published its weekly crude oil rig count report. The US crude oil rig count fell by two rigs to 536 rigs during the week.
The US oil rig count peaked at 1,609 rigs in October 2014 and bottomed out at 536 rigs on January 1, 2016. Drilling activity declined due to the fall in oil prices by 65% since June 2014 as a result of oversupply concerns. The idling of the rigs was seen more in vertical rigs than in horizontal rigs. The vertical crude oil rig count fell by 70% in 2015, as compared to a 59% drop in the horizontal rig count.
The fall in drilling activity affects drillers like the Baker Hughes, Schlumberger (SLB), Superior Energy Services (SPN), and Halliburton (HAL). The fall in drilling activity suggests oil production could slow down. Market surveys suggest US production could decline by 400,000 bpd (barrels per day) in 2016. The EIA’s monthly drilling productivity report estimates that the US crude oil output could fall by 116,000 bpd (barrels per day) in January 2016, as compared to December 2015.
The higher break-even costs and production costs of US oil producers are the vital reasons for the drop in US production. Falling oil prices also affect the Vanguard Energy ETF (VDE) and the VelocityShares 3x Long Crude Oil ETN (UWTI). To learn about thow the depressed energy sector is affecting the overall US market, read Crude Oil Market: Energy Industry Is Weighing on SPY.
Read the next part of this series to learn more about the latest oil forecast.