Crude oil rig count
On January 29, 2016, Baker Hughes (BHI) published its weekly crude oil rig count report. The report highlighted that the US crude oil rig count fell by 13 rigs to 497 rigs for the week ending January 29, 2016. Last week, the US crude oil rig count fell by five rigs to 510 rigs for the week ending January 22, 2016. The active US crude oil rig count fell for the sixth consecutive week. So far, the US crude oil rig count fell by 41 rigs in 2016.
The EIA (U.S. Energy Information Administration) estimates that the US crude oil production could fall by 116,000 bpd (barrels per day) in February 2016. The latest monthly crude oil production figures suggest that the US crude oil production fell for the second consecutive month in November 2015. The US monthly crude oil production was at 9.32 MMbpd (million barrels per day) in November 2015—compared to 9.37 MMbpd in October 2015.
In 2015, the US crude oil rig count fell by 62% to 961 rigs. The fall in the drilling was due to lower oil prices. The lower prices were due to record production from Russia and Saudi Arabia. Record low oil prices impact drillers like Baker Hughes, Schlumberger (SLB), Superior Energy Services (SPN), and Halliburton (HAL).
Oppenheimer Holdings suggests that oil and gas drillers in the US could go bankrupt due to record low oil prices and the mammoth fall in the drilling activity. The US oil rig count peaked at 1,609 rigs in October 2014. They tested a new low of 497 rigs on January 29, 2016.
The current oil rig momentum suggests that oil producers are less optimistic about higher oil prices. We could see the oil rig count continue to fall in the short term. However, the recent 25% rally in oil prices benefits upstream players like Chevron (CVX) and Whiting Petroleum (WLL).
The roller coaster ride in the oil and gas market also impacts ETFs and ETNs like the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the First Trust Energy AlphaDEX Fund (FXN), the Vanguard Energy ETF (VDE), and the VelocityShares 3X Long Crude Oil ETN (UWTI).
In the next part of this series, we’ll explore the latest U.S. Commodities Futures Trading Commission report.