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US Crude Oil Rigs Indicate Future US Crude Oil Production

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Crude oil rigs  

Baker Hughes, a GE company, released its weekly US crude oil rig report on December 15, 2017. US crude oil rigs fell by four to 747 or 0.5% on December 8–15, 2017. It was the first fall in the last six weeks. However, rigs rose 46.5% from the same period in 2016. US oil (UWT) (SCO) prices were near a three-year high.

Higher oil prices benefit ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the iShares U.S. Oil Equipment & Services (IEZ).

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US crude oil rigs’ peaks and lows  

US crude oil rigs hit 1,609 in October 2014. The EIA estimates that crude oil rigs follow crude oil prices with an approximate four-month lag. US crude oil (UWT) (DWT) prices averaged above $100 per barrel in June 2014. Higher oil prices benefit oil drillers like Transocean (RIG), Diamond Offshore (DO), and Halliburton (HAL).

US crude oil rigs hit 316 in May 2016—the lowest level since the 1940s. US crude oil (DBO) prices averaged ~$32 per barrel in January 2016. Prices were near a 13-year low.

Monthly international crude oil rig count 

Baker Hughes estimates that the international crude oil rig count rose by seven to 720 in November 2017—compared to October 2017. International crude oil rigs rose 1% month-over-month and 5.7% or by 39 rigs year-over-year.

Impact 

US crude oil rigs have risen 41% or by 218 rigs year-to-date. US crude oil rigs are a leading indicator for future US crude oil production. US production has risen 16% since July 2016. Rystad Energy estimates that US oil production could surpass 9.9 million barrels per day by December 2017. Higher oil prices would increase US rigs and supplies, which would pressure oil (DWT) prices.

Next, we’ll discuss key drivers for crude oil prices this week.

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