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US Crude Oil Rigs: Highest Level since September 2017

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Dec. 11 2017, Updated 9:30 a.m. ET

Crude oil rigs 

Baker Hughes, a General Electric (GE) company, released its US crude oil rigs report on December 8, 2017. US crude oil rigs rose by two to 751 on December 1–8, 2017. Crude oil rigs rose 0.3% week-over-week and 51% year-over-year. Rigs rose for the third straight week, while US oil (UCO) (OIL) prices were near a 30-month high.

Higher oil prices benefit ETFs like the SPDR S&P Oil & Gas Equipment & Services (XES) and the iShares U.S. Oil Equipment & Services (IEZ). Some of these ETFs have exposure to oil equipment companies like Transocean (RIG), Schlumberger (SLB), and Halliburton (HAL).

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US crude oil rigs’ peaks and lows 

US crude oil rigs tested 1,609 in October 2014. Higher crude oil (UWT) (DWT) prices between 2011 and 2014, cheaper credit facilities, and technological improvement led to the increase in US crude oil rigs. However, rigs tested 316 in May 2016—the lowest level since the 1940s. Rigs fell due to lower crude oil prices and higher production and breakeven costs for US producers (XLE) (VDE) compared to their peers.

Oil prices, rigs, and crude oil production 

Rigs rose ~137% from the lows in May 2016. US oil (UCO) prices have risen ~30% since June 2017. The US oil output has risen ~15% since July 2016. Higher oil prices could drive US drilling activity and production. Rystad Energy predicts that US oil production could surpass 9.9 million barrels per day by December 2017.

Impact  

US crude oil rigs were near the highest level since September 8, 2017. It pressured oil (DWT) prices in early morning trade on December 11, 2017. Higher oil prices could increase US supplies, which would pressure oil (USL) prices.

Next, we’ll discuss the important catalyst for crude oil prices this week.

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