US crude oil rigs
Baker Hughes, a GE Company (BHGE), released its US crude oil and natural gas rig count report on May 18. Baker Hughes reported that US crude oil rigs were flat at 844 on May 11–18—the highest level since March 13, 2015. The rigs have also risen by 132 or ~18.5% from a year ago.
WTI crude oil prices have increased ~68% since June 21, 2017. The iShares U.S. Oil Equipment & Services ETF (IEZ) and the SPDR S&P Oil & Gas Equipment & Services ETF (XES) have risen ~27.4% and ~30%, respectively, since June 21, 2017. These ETFs have exposure to OFS (oilfield equipment and services) stocks.
EIA’s monthly drilling productivity report
The EIA estimates that US crude oil production in the seven shale regions would rise by 144,000 bpd (barrels per day) to 7,178,000 bpd in June—compared to the previous month. Crude oil production is estimated 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. The rigs have increased by 528 or ~167.1% since May 27, 2016, mainly due to higher crude oil prices. Active WTI crude oil futures have increased ~68% since June 21, 2017.
WTI oil prices increased ~0.8% last week. National Oilwell Varco (NOV) and TechnipFMC (FTI) increased 6.8%, respectively, last week. The VanEck Vectors Oil Services ETF (OIH) rose ~4.4% last week. OIH seeks to track an index of OFS companies including National Oilwell Varco and TechnipFMC. These two companies account for ~9.5% of OIH’s holdings.
Higher oil prices and higher exploration and production activity benefit companies like National Oilwell Varco and TechnipFMC, which supports their operations. Higher oil prices this year could increase US oil rigs and crude oil production, which might weigh on oil prices. However, rising upstream activity due to higher crude oil and natural gas prices benefits OFS companies.
Next, we’ll discuss what could drive crude oil prices this week.