Oil rig count
In the week ending December 1, 2017, the oil rig count rose by two to 749. In the last four weeks, there hasn’t been a decline in the oil rig count. Since the release of the oil rig count data last week, US crude oil prices have fallen 1.3%.
Oil rig count could increase more
There has been a definite pattern between US crude oil prices and the oil rig count. Oil’s tops and bottoms occur three to six months ahead of the oil rig counts.
US crude oil saw a 12-year low in February 2016. In a gap of around three months, the oil rig count fell to its 6.5-year low of 316 in May 2016. From the 12-year low, US crude oil prices have risen 119.8%. There was a similar rise in the oil rig count from May 2016.
From May 2016 to date, US crude oil production has grown 10.8%. So, it’s evident that a rising oil rig count could push oil supplies higher.
On November 24, 2017, US crude oil settled at the highest closing price in 2017. Based on the pattern, the oil rig count could reach a new three-year high by May 2018.
Any upside in the oil rig count could have a negative impact on oil prices in the long term, which would eventually be bad for oil producers’ (XLE) (FENY) stock prices. Broader equity indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) will also be impacted by energy stocks’ fluctuations.