Analyzing US Crude Oil Rig Counts

US crude oil rig count 

Baker Hughes, a GE Company (BHGE), released its weekly US crude oil rig count report on June 15. Baker Hughes reported that the US crude oil rig count rose by one to 863 on June 8–15—the highest level since March 13, 2015. The rigs have also risen by 116 or ~15.5% from a year ago.

US crude oil futures have increased ~53% since June 21, 2017. The iShares US Oil Equipment & Services ETF (IEZ) has risen ~13% since June 21, 2017. IEZ has exposure to oilfield equipment and services stocks.

Analyzing US Crude Oil Rig Counts

However, WTI oil prices fell ~1% on June 8–15. IEZ fell 4.5% to $35.57 during the same period. Ensco (ESV), Noble (NE), Tidewater (TDW), and Nabors Industries (NBW) account for ~7.6% of IEZ’s holdings. These stocks fell 12.6%, 12.2%, 10.6%, and 10.5%, respectively, on June 8–15. These stocks fell the most among IEZ’s holdings during this period.

Peaks and lows 

US crude oil rigs hit a record high of 1,609 in October 2014. US crude oil rigs follow oil prices with an approximate four-month lag. WTI oil prices averaged ~$104 per barrel in June 2014.

US crude oil rigs hit 316 on May 27, 2016—the lowest level since the 1940s. WTI oil prices averaged ~$32.8 per barrel in January 2016.

Impact  

For the week ending June 15, US crude oil rigs have risen 547 or ~173% since May 27, 2016, mainly due to higher crude oil prices. Active WTI crude oil prices have increased ~53% since June 21, 2017.

Higher crude oil prices in 2018 could increase US oil rigs and the crude oil production, which could eventually pressure oil prices.

Next, we’ll discuss hedge funds’ net long positions in WTI crude oil.