US crude oil rig count and the election
On November 4, 2016, Baker Hughes (BHI) released its weekly US crude oil rig count. It reported that the US crude oil rig count rose by nine to 450 rigs between October 28 and November 4, 2016. US crude oil rigs rose for the 17th time in the last 19 weeks. The active rigs rose as crude oil prices recovered from lows earlier this year. The rise in the crude oil rig count could slow down the pace of falling US crude oil production and pressure crude oil prices. For more on crude oil prices, read Part 1 of this series.
Proposed energy policies from Donald Trump suggest that if he wins the US presidential election, US drilling activity could increase. Read How Could Donald Trump Impact the US Energy Market? and How Could Hillary Clinton Impact the US Energy Market? to learn more.
The rise in the US drilling activity could have a positive impact on oil production. It could also have a positive impact on companies’ earnings such as Rowan Companies (RDC), Diamond Offshore Drilling (DO), Baker Hughes (BHI), Halliburton (HAL), Transocean (RIG), ExxonMobil (XOM), and Laredo Petroleum (LPI). The US crude oil rig count fell 21.3% year-over-year, but rose 2% week-over-week.
Peaks and lows
The US crude oil rig count peaked at 1,609 in October 2014. It hit 316 in the week ending May 27, 2016—the lowest level since the 1940s. US drilling activity fell due to lower crude oil prices, which were the result of oversupply. The US crude oil rig count rose by 136 rigs from the lows in May 2016.
Impact on ETFs
Movements in crude oil and natural gas rigs can move energy prices. Uncertainty in crude oil and natural gas prices impacts oil producers and drillers. It also impacts funds such as the VelocityShares 3x Long Crude Oil ETN (UWTI), the iShares Global Energy (IXC), the iShares US Oil Equipment & Services (IEZ), the Fidelity MSCI Energy ETF (FENY), the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), 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.