Weekly US crude oil rig count
On October 14, 2016, Baker Hughes (BHI) released its weekly US crude oil rig count. It reported that the US crude oil rig count rose by four to 432 rigs from October 7–14, 2016. The US crude oil rig count rose for the 15th time in the last 16 weeks. The number of active rigs rose as crude oil prices recovered from lows earlier this year.
The rise in the rig count could slow down the pace of falling US crude oil production and pressure crude oil prices again. For more on crude oil prices, read part one of this series.
The rise in US drilling activity could have a positive impact on oil production. It could also have a positive impact on companies’ earnings such as Transocean (RIG), Rowan Companies (RDC), Diamond Offshore (DO), Baker Hughes (BHI), Halliburton (HAL), and Laredo Petroleum (LPI).
The US crude oil rig count has fallen 27.4% YoY (year-over-year), but it has risen 0.9% week-over-week.
The US crude oil rig count’s peaks and lows
The US crude oil rig count peaked at 1,609 in October 2014. In contrast, it hit 316 in the week ending May 27, 2016, the lowest level since the 1940s. The US drilling activity fell due to lower crude oil prices. The lower prices were due to oversupply. The US crude oil rig count has risen by 116 rigs from the lows in May 2016.
EIA’s monthly drilling report
The EIA (U.S. Energy Information Administration) released its monthly Drilling Productivity report on October 17, 2016. It estimates that US crude oil production will fall in the seven shale regions by 30,000 barrels per day to 4.4 million barrels per day in November 2016 compared to the previous month. Production is expected to fall in the Eagle Ford and Bakken Shale regions during the same period.
Monthly international rig count
Baker Hughes’s international oil rig count excludes data in the US and Canada. It showed that oil rigs rose by six rigs to 684 for September 2016 compared to the previous month. The count rose 0.9% month-over-month. However, it fell by 187 rigs, or 21.5%, YoY.
Impact on ETFs
The roller coaster ride in oil and gas prices impacts oil producers and drillers. It also impacts funds such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the Fidelity MSCI Energy ETF (FENY), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the ProShares Ultra Bloomberg Crude Oil ETF (UCO), and the PowerShares DWA Energy Momentum ETF (PXI).
In the next part of this series, we’ll take a look at the Commodity Futures Trading Commission’s “Commitments of Traders” report.
The EIA (U.S. Energy Information Administration) estimates that crude oil supply could outstrip demand by 780,000 bpd (barrels per day) in 4Q16.
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