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Will the US Crude Oil Rig Count Support Crude Oil Futures?

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Aug. 21 2017, Published 11:01 a.m. ET

US crude oil rig counts 

Baker Hughes (BHI) released its US crude oil rig count report on August 18, 2017. It reported that the US crude oil rig count fell by five to 763 on August 11–18, 2017—the same level as of July 7, 2017. US crude oil rig count fell 0.7% week-over-week.

It suggests that US crude oil rigs are slowing. Rigs are slowing due to lower crude oil (DIG) (OIH) (XES) prices in the past few months. Volatility in crude oil prices impacts drillers such as Diamond Offshore Drilling (DO), Atwood Oceanics (ATW), and Transocean (RIG). Slowing rigs supported crude oil futures on August 18, 2017.

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Peak and low  

The US crude oil rig count hit an all-time high of 1,609 in October 2014. On the other hand, rigs hit 316 in May 2016—the lowest level since the 1940s. Rigs have risen ~140% from lows in May 2016. Rigs have also risen 88% year-over-year.

EIA’s monthly drilling report 

The EIA (U.S. Energy Information Administration) released its monthly “Drilling Productivity” report on August 14, 2017. It reported that US shale oil production will rise in the seven shale regions by 117,000 bpd (barrels per day) to 6,149,000 bpd in September 2017—compared to August 2017. Production is at the highest level since March 2016.

Why would US production rise in 2017 and 2018? 

The factors driving US crude oil production are mentioned below:

  • President Trump’s energy plans could have an impact on production.
  • A market survey showed that $57.0 billion has been invested in US shale oil production in the last 18 months.
  • Technological advancement could drive production.
  • Improving efficiency could be a factor.

High US crude oil production could offset supply outages and OPEC’s output cut deal and pressure crude oil (IEZ)(XLE) prices.

Read Crude Oil: Price Forecasts and Hedge Funds’ Position for more information on crude oil price forecasts.

Read Will US Crude Oil Production Overshadow Inventory Draws? and Will Global Oil Demand Overshadow Ample Supplies? to learn more.

Read Will US Natural Gas Futures Fall in 3Q17? for more on natural gas.

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