US crude oil rig count
Baker Hughes, a GE Company (BHGE), released its weekly US crude oil rigs report on June 29. Baker Hughes reported that US crude oil rigs fell by four to 858 on June 22–29. However, the rigs have risen by 102 or ~13.5% from a year ago.
WTI oil prices have increased ~74.2% since June 21, 2017. The iShares US Oil Equipment & Services ETF (IEZ) has risen ~15.1% since June 21, 2017. IEZ has exposure to oilfield equipment and services stocks.
The rigs increased 15% during the first half of the year. Active WTI crude oil futures increased 23% to $74.15 per barrel during the same period. IEZ rose 2.2% during the same period.
Ensco (ESV), Noble (NE), Helix Energy (HLX), and Unit (UNT) rose 23.3%, 20%, 18%, and 17%, respectively, during the first half of the year. These stocks were among the top percentage gainers in IEZ’s holdings during this period. These stocks account for ~7% of IEZ’s holdings.
Peaks and lows
The US crude oil rig count hit a record high of 1,609 in October 2014. Rigs follow oil prices with an approximate four-month lag. WTI oil prices averaged ~$104 per barrel in June 2014. In contrast, 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.
US crude oil rigs hit 863 during the week ending June 15—the highest level since March 13, 2015. For the week ending June 29, the rigs have declined by five or 0.6% since June 15. However, WTI oil prices increased 14% during the same period. Oil prices were at the highest level since November 2014.
Higher oil prices could see rigs rise in the upcoming months. Higher rigs could increase US crude oil production and eventually pressure oil prices.
Next, we’ll discuss hedge funds’ net long positions in WTI crude oil.