US crude oil rig count
On Friday, April 1, 2016, Baker Hughes (BHI) released its weekly US crude oil rig count report. The US crude oil rig count fell by ten to 362 rigs for the week ending April 1, 2016, which is the lowest level since the 1940s. Crude oil prices didn’t react to the record low US crude oil rig count, which we discussed in the first part of the series.
US crude oil rig count fell by 176 in 2016
The US crude oil rig count peaked at 1,609 rigs in October 2014. However, it has fallen by 176 rigs in 2016 alone. US drilling activity fell as a result of lower crude prices due to oversupply. The US crude oil rig count has fallen by 77% from its peak levels. The fall in drilling activity affects drillers like Noble (NE), Rowan Companies (RDC), Ensco (ESV), and Seadrill (SDRL).
Meanwhile, oil prices have fallen by 65% since their June 2014 peak levels. Low oil prices affect US oil producers because they have higher break-even costs and production costs compared to Middle Eastern and Russian oil producers. For more information on US energy companies’ financial woes, read US Oil and Gas Companies’ Debt Exceeds $200 Billion and Crude Oil’s Total Cost of Production Impacts Major Oil Producers.
Monthly drilling report
In its monthly energy report, the U.S. Energy Information Administration stated that US crude oil production from seven shale regions could fall by 106,000 bpd (barrels per day) in April 2016 compared to the previous month. Analysts expect crude oil production in the Eagle Ford, Bakken, and Niobrara to fall the most.
The volatility in crude oil prices affects ETFs and ETNs like the ProShares Ultra Oil & Gas (DIG), the PowerShares DWA Energy Momentum (PXI), the United States Brent Oil (BNO), the Guggenheim S&P 500 Equal Weight Energy (RYE), and the VelocityShares 3x Inverse Crude Oil ETN (DWTI).
Read the next part of the series to learn more about Cushing crude oil stocks.