US Oil Production: Analyzing Key Drivers


May. 7 2019, Published 8:02 a.m. ET

Oil rig count

Last week, the oil rig count rose by two to 807— near the lowest level since March 30, 2018. The rig count tends to follow US crude oil prices with a three to six-month lag.

Sign up for Bagels & Stox, our witty take on the top market and investment news, straight to your inbox! Whether you’re a serious investor or just want to be informed, Bagels & Stox will be your favorite email.

In February 2016, US crude oil prices fell to the lowest closing level in 12 years. Between February 11, 2016, and May 6, 2019, US crude oil active futures rose 137.5%. The oil rig count reached a 6.5-year low of 316 in May 2016. Between May 27, 2016, and May 3, 2019, the oil rig count rose ~155.3%. Between May 27, 2016, and April 26, 2018, US crude oil production rose ~40.8%.

Article continues below advertisement

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. In the current quarter, the US crude oil production growth rate might reverse. US crude oil production fell by 187 thousand barrels per day in February on a month-over-month basis for the second consecutive month based on the U.S. Energy Information Administration’s Monthly Oil Production report released on April 30.

In the week ending November 16, the oil rig count was at 888—the highest level since March 2015. In the week ending on April 26, the US crude oil production was 12.3 MMbpd (million barrels per day)—a new record level. With the lower oil rig count, US crude oil production might fall going forward.

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 15.5%. Schlumberger (SLB), Halliburton (HAL), and Transocean (RIG) fell 14.5%, 14.9%, and 22%, 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).


More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.