US crude oil rig count
Baker Hughes (BHI) released its weekly US crude oil rig count report on Friday, April 8, 2016. The report showed that the US crude oil rig count fell by eight to 354 rigs for the week ending April 8, 2016, compared to the previous week. The rig count is at its lowest level since the 1940s. Crude oil prices rallied almost 8% in the last two trading sessions. To learn more, read the first part of the series.
US crude oil rig count fell by 184 year-to-date
The US crude oil rig count fell by 184 rigs YTD (year-to-date). The US crude oil rig count peaked at 1,609 rigs in October 2014. This is almost 78% less than its peak levels. The US drilling activity fell due to lower crude oil prices. Prices fell almost 65% since June 2014 due to oversupply. The fall in drilling activity affects drillers like Seadrill (SDRL), Noble (NE), Transocean (RIG), and Atwood Oceanics (ATW).
Monthly drilling report
On April 11, 2016, the US Energy Information Administration released its monthly drilling report. The report showed that US crude oil production from the major seven shale regions could fall by 114,000 bpd (barrels per day) to 4.8 MMbpd (million barrels per day) in May 2016 compared to April 2016. Crude oil production levels in the Eagle Ford, Bakken, and Niobrara are expected to decline by 62,000 bpd, 31,000 bpd, and 16,000 bpd, respectively, for the same period. To learn more about US crude oil production, read the previous part of the series.
Crude oil prices affect ETFs and ETNs like the ProShares Ultra Oil & Gas (DIG), the PowerShares DWA Energy Momentum (PXI), the Guggenheim S&P 500 Equal Weight Energy (RYE), the First Trust Energy AlphaDEX Fund (FXN), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).
In the next part of the series, we’ll look at how the hedge funds are playing the crude oil market.