Oil rig count
Last week, the oil rig count fell by one to 833—the lowest level since May. 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 March 18, 2019, US crude oil active futures rose 125.4%. The oil rig count reached a 6.5-year low of 316 in May 2016. Between May 27, 2016, and March 15, 2019, the oil rig count rose ~163.6%. Between May 27, 2016, and March 8, 2018, US crude oil production rose ~37.4%.
US crude oil production
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. By the second quarter, the US crude oil production growth rate might reverse more. In the week ending November 16, the oil rig count was at 888—the highest level since March 2015. In the week ending March 8, the US crude oil production was 12 MMbpd (million barrels per day). The oil production fell by just 0.1 MMbpd. However, the production fell for the first time since the week ending December 7. With the fall in the oil rig count, the fall in US crude oil production might accelerate.
US crude oil output and oilfield services stocks
Since the US oil rig count hit a multiyear high on November 16, the VanEck Vectors Oil Services ETF (OIH) has fallen 9.2%. Schlumberger (SLB), Halliburton (HAL), Transocean (RIG), and Baker Hughes, a GE company (BHGE), have returned -10.1%, -11.1%, -2.5%, and 20.6%, respectively. OIH has 44% exposure to these stocks. Any slowdown in US oil drilling activities could be a concern for these stocks.
Any slowdown in US oil production might also impact broader market indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA).
On March 18, the US crude oil May 2019 futures closed ~$0.24 above the May 2020 futures. On March 11–18, US crude oil May futures rose 1.3%.
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