US crude oil rig count
Baker Hughes (BHI) reported that the US crude oil rig count rose by 17 to 583 rigs between January 27, 2017, and February 3, 2017. The US crude oil rig count rose 28 times in the last 31 weeks. US crude oil rigs are at the highest level since October 2015.
The US crude oil rig count rose 3% week-over-week and 21.2% YoY (year-over-year). Active oil rigs rose as crude oil (FENY) (RYE) (IXC) (IYE) prices recovered from their lows in early 2016. The rise in the crude oil rig count could increase US crude oil production and pressure crude oil prices in 2017. For more crude oil prices, read Part 1 and Part 4 of this series.
Successful implementation of Trump’s energy policies could also increase the US drilling activity, which would be reflected in higher active rigs.
Changes in crude oil (BNO) (XES) (USL) (IEZ) and natural gas (UGAZ) (BOIL) (DGAZ) (UNG) prices impact oil producers and drillers. A rise in US drilling activity would increase US crude oil production. In the short term, it could have a positive impact on companies’ earnings like Schlumberger (SLB), Halliburton (HAL), Rowan Companies (RDC), Devon Energy (DVN), ExxonMobil (XOM), Whiting Petroleum (WLL), and Diamond Offshore (DO).
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 85% from lows in May 2016. As of February 3, 2017, crude oil prices rose 105% from their 2016 lows.
In the next part of this series, we’ll discuss how Iran’s crude oil output impacts the crude oil market.