US crude oil rig count
Baker Hughes (BHI) reported that the US crude oil rig count rose by eight to 617 rigs from March 3–10, 2017. The US crude oil rig count has risen 33 times in the last 36 weeks. US crude oil rigs are at the highest level since September 2015.
The US crude oil rig count has risen 1.3% week-over-week and 59.8% YoY (year-over-year). The number of US crude oil rigs rose as crude oil (BNO) (IYE) (IEZ) 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 on crude oil prices, read Part 1 and Part 4 of this series.
Successful implementation of President Trump’s energy policies could also increase US drilling activity. It would be reflected in a higher number of active rigs.
Volatility in crude oil (IXC) (XES) (PXI) and natural gas (DGAZ) (UNG) (FCG) (DGAZ) prices also impacts oil producers and drillers. A rise in US drilling activity would increase US crude oil production. In the short term, it would have a positive impact on companies’ earnings such as Halliburton (HAL), Schlumberger (SLB), Marathon Oil (MRO), Atwood Oceanics (ATW), Rowan Companies (RDC), and Chevron (CVX).
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 on May 27, 2016—its 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 has risen ~95.3% from its lows in May 2016. As of March 10, 2017, crude oil prices have risen ~85.5% from their 2016 lows.
EIA’s monthly drilling report
The EIA (U.S. Energy Information Administration) will release its monthly Drilling Productivity report on March 13, 2017. In its previous report, it estimated that US crude oil production will rise in the seven shale regions by 80,000 bpd (barrels per day) to 4,873,000 bpd in March 2017—compared to the previous month. Production is expected to rise mainly in the Permian and Eagle Ford Shale regions during this period. Technical advancement and improving productivity led to the rise in production in US shale regions.
In the last part of this series, we’ll take a look at some crude oil price forecasts.