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Are US Crude Oil Rigs Impacting Crude Oil Prices?

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US crude oil rigs 

Baker Hughes, a General Electric (GE) company, published its US crude oil rig count report on January 5, 2018. US crude oil rigs fell by five or 0.7% to 742 between December 29, 2017, and January 5, 2018. The rigs were near an eight-week low. Stalling rigs could slow down US crude oil production and support crude oil (SCO) (DWT) prices. Meanwhile, US crude oil prices were near a three-year high.

Higher oil (UCO) prices benefit ETFs like the Vanguard Energy ETF (VDE) and the SPDR S&P Oil & Gas Equipment & Services ETF (XES).

Peaks and lows  

US crude oil rigs tested 1,609 in October 2014—the highest level ever. Crude oil rigs follow oil (USO) (BNO) prices with an approximate four-month lag. US oil (DWT) prices averaged above $100 per barrel in June 2014. Higher oil prices favor oil drillers like Diamond Offshore (DO) and Schlumberger (SLB).

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 

According to Baker Hughes, international crude oil rigs increased by ten to 730 in December 2017—compared to November 2017. International crude oil rig rigs rose 1.4% month-over-month and 5% or by 34 rigs year-over-year. 

Impact 

US crude oil rigs rose by 426 or 135% from the lows in May 2016. US crude oil output has risen 16.1% since July 2016. Market surveys estimate that US crude oil production could hit a record in 2018. Higher oil prices would increase US oil rigs and supplies, which could pressure oil (DBO) prices.

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

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