US crude oil rigs
Baker Hughes (BHGE), a GE company, released its weekly US crude oil rig count report on April 13, 2018. Baker Hughes reported that US crude oil rigs increased by seven to 815 on April 6–13, 2018. The rigs are at the highest level since March 20, 2015. The rigs also increased by 132 or ~19.3% year-over-year.
The rigs increased because WTI oil prices have increased ~55.7% since June 21, 2017. The SPDR S&P Oil & Gas Equipment & Services ETF (XES) and the iShares U.S. Oil Equipment & Services ETF (IEZ) have risen ~13%, respectively, since June 21, 2017. These funds have exposure to OFS (oilfield equipment and services) companies.
EIA’s monthly drilling report
The EIA released its monthly Drilling Productivity report on April 16, 2018. The EIA estimates that US crude oil production in the seven shale regions would rise by 125,000 bpd (barrels per day) to 6,996,000 bpd in May 2018—compared to the previous month. Production is expected to rise mainly in the Permian and Eagle Ford Shale regions during this period.
US crude oil rigs hit 316 on May 27, 2016—the lowest level since the 1940s. Rigs have increased by 499 or ~158% since May 27, 2016, partly due to higher crude oil prices. WTI oil prices have increased ~55.7% since June 21, 2017. Halliburton (HAL) and Schlumberger (SLB) increased 21% and 7.1%, respectively, during the same period. Higher oil prices and higher exploration and production activity help companies like Schlumberger and Halliburton, which supports their operations.
Helmerich & Payne (HP) estimates that the US oil rig count could increase by 100–200 rigs in 2018. Higher oil prices in 2018 could increase US oil rigs and oil production, which could pressure oil prices. However, rising upstream activity due to higher oil and natural gas prices benefits OFS companies. The VanEck Vectors Oil Services ETF (OIH) has gained ~12% since June 21, 2017. OIH aims to track an index of OFS companies including Schlumberger and Halliburton. These two companies account for ~37% of OIH’s holdings.
Next, we’ll discuss US crude oil exports.