Oil rig count

Last week, the oil rig count rose by 12 to 886—the highest level since March 2015. The rig count tends to follow US crude oil prices with a three to six-month lag. In February 2016, US crude oil prices fell to the lowest closing level in 12 years. Between February 11, 2016, and November 12, 2018, US crude oil active futures rose 128.7%.

Oil Rig Count Reaches a New Multiyear High

The oil rig count reached a 6.5-year low of 316 in May 2016. Between May 27, 2016, and November 9, 2018, the oil rig count rose ~180.4%. Between May 27, 2016, and November 2, 2018, US crude oil production rose ~32.8%.

More upside in the oil rig count?

On October 3, US crude oil active futures settled at $76.41 per barrel—the highest closing level since November 21, 2014. Based on the pattern we saw above, the oil rig count could keep rising until at least March 2019.

US crude oil output

In the week ending on November 2, US crude oil production was at 11.6 MMbpd (million barrels per day)—its new record level. On June 1–October 26, US crude oil production was between 10.8 MMbpd and 11.2 MMbpd. US crude oil production broke that range with a rise in the oil rig count in the last few weeks, which might be a concern for oil bulls.

Oilfield services stocks

Since February 11, 2016, the VanEck Vectors Oil Services ETF (OIH) has fallen 10.7%. Schlumberger (SLB), Halliburton (HAL), Transocean (RIG), and Baker Hughes (BHGE) have returned -28.2%, 18.6%, 13.2%, and -14.7%, respectively. Together, they account for ~44% of OIH’s holdings.

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