US crude oil rig count and Trump
Baker Hughes (BHI) released its weekly US crude oil rig count on December 23, 2016. It reported that the US crude oil rig count rose by 13 to 523 rigs between December 16 and December 23, 2016. The US crude oil rig count has risen 23 times in the last 25 weeks. Active US crude oil rigs rose as crude oil (BNO) (PXI) (USL) (USO) (UCO) prices recovered from the lows earlier this year. The rise in the crude oil rig count could increase US crude oil production and pressure crude oil prices in 2017.
Successful implementation of Donald Trump’s proposed energy policies could also increase US drilling activity, which would be reflected by higher active rigs. Higher activity could also have a negative impact on crude oil prices.
The rise in US drilling activity could have a positive impact on US crude oil production. In the short term, it could also have a positive impact on the earnings of companies like ConocoPhillips (COP), Halliburton (HAL), Transocean (RIG), Rowan Companies (RDC), ExxonMobil (XOM), Devon Energy (DVN), Diamond Offshore Drilling (DO), Whiting Petroleum (WLL), and Laredo Petroleum (LPI).
The US crude oil rig count fell 2.8% year-over-year but rose 2.5% week-over-week.
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. US drilling activity fell due to lower crude oil prices, which were the result of oversupply. The US crude oil rig count rose by 185 rigs from the lows in May 2016.
EIA’s monthly drilling report
The EIA (U.S. Energy Information Administration) estimates that US crude oil production will rise in the seven shale regions by 2,000 bpd (barrels per day) to 4.5 billion bpd in February 2017 compared to the previous month. Production is expected to rise mainly in the Marcellus and Permian Shale regions during that period.
Impact on ETFs
The roller coaster ride in crude oil and natural gas rigs can move energy prices. Changes in crude oil and natural gas prices impact oil producers and drillers. They also impact funds such as the iShares US Oil Equipment & Services (IEZ), the iShares Global Energy ETF (IXC), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the Fidelity MSCI Energy ETF (FENY), and the Guggenheim S&P 500 Equal Weight Energy ETF (RYE).
In the last part of this series, we’ll take a look at some crude oil price forecasts.