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US Crude Oil Rigs Could Impact Crude Oil Prices in 2018

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US crude oil rigs  

Baker Hughes, a GE company, released its US crude oil rigs report on January 12, 2018. It reported that US crude oil rigs increased by ten to 752 on January 5–12, 2018. Rigs increased 1.3% week-over-week and 44.1% or by 230 year-over-year. US crude oil prices are at a 37-month high.

Higher oil (UCO) (USO) prices benefit ETFs like the VanEck Vectors Oil Services ETF (OIH) and the iShares U.S. Oil Equipment & Services ETF (IEZ). Higher prices also favor drillers like Diamond Offshore (DO) and Transocean (RIG).

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Peaks and lows 

US crude oil rigs hit 1,609 in October 2014, which was the highest level ever. In contrast, US crude oil rigs hit 316 in May 2016—the lowest level since the 1940s.

Monthly drilling report

The EIA will release its monthly drilling productivity report on January 16, 2018. In its previous report, it estimated that US shale oil production in the seven shale regions would rise by 94,000 bpd (barrels per day) to 6,408,000 bpd in January 2017—compared to the previous month. It will be the 13th straight rise in US shale oil production. Any rise in US oil production is bearish for oil prices.

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Monthly international crude oil rigs  

International crude oil rigs increased by ten or 1.4% to 730 in December 2017—compared to the previous month. International oil rig rigs also increased 5% or by 34 rigs from a year ago. 

Impact  

Rigs increased by 436 or 138% since the lows in May 2016. US crude oil (SCO) (DBO) prices have increased ~37% since May 2016. US crude oil output has risen 13% since July 2016. The EIA estimates that US crude oil output could hit a new record in 2018. Higher oil prices would increase US oil rigs and production, which could weigh on oil (UWT) prices in 2018.

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

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