11 Jun

Why US Might Add More Barrels of Oil?

WRITTEN BY Rabindra Samanta

Oil rig count

Last week, the oil rig count fell by 11 to 789—the lowest level since February 2, 2018. The rig count tends to follow US crude oil prices with a three to six-month lag.

Why US Might Add More Barrels of Oil?

In February 2016, US crude oil prices fell to the lowest closing level in 12 years. Between February 11, 2016, and June 10, 2019, US crude oil active futures rose 103.2%. The oil rig count reached a 6.5-year low of 316 in May 2016. Between May 27, 2016, and June 7, 2019, the oil rig count rose ~149.7%. Between May 27, 2016, and May 31, 2019, US crude oil production rose ~42%.

Has the oil rig count bottomed out?

On December 24, US crude oil active futures settled at $42.53 per barrel—the lowest closing level since August 10, 2016. Based on the pattern we saw above, the oil rig count could keep falling until at least June. Last week, the oil rig count was at the lowest level since February 2, 2018. In the current quarter, the US crude oil production might rise. For the week ending May 31, US crude oil weekly production rose to a new record high of 12.4 MMbpd (million barrels per day) after fluctuating between 12.1 MMbpd and 12.3 MMbpd since mid-February.

Oilfield services stocks

Since the US oil rig count hit a multiyear high of 888 on November 16, the VanEck Vectors Oil Services ETF (OIH) has fallen 29.6%. Schlumberger (SLB), Halliburton (HAL), and Transocean (RIG) have fallen 26.4%, 33%, and 38.7%, respectively. OIH has 44% exposure to these stocks. Any slowdown in US oil drilling activities could be a concern for these oil services stocks. Between November 16, 2018, and June 7, 2019, the oil rig count fell ~11.1%. If the oil rig count bottoms out, it might benefit these oilfield services stocks.

Latest articles

Alphabet’s Waymo One plans to start using driverless cars for its autonomous taxis. The service is available to a small group of customers in Phoenix.

Hexo (HEXO) had a hard time last week. A lot of headwinds pulled the stock down. However, the stock rose and closed with a gain of 17% on Thursday.

Elliott Management expects AT&T stock to reach $60.0 by the end of 2021 if it adopts the restructuring plan. The stock has a potential upside of almost 60%.

Tesla (TSLA) stock is having a strong run this month. After a weak start, the stock has closed with gains for nine consecutive trading days.

Chipotle is scheduled to report its third-quarter earnings on October 22. Despite the rise in the stock, Chipotle's earnings could drive the stock more.

The Cannabis 2.0 era has officially started. Now, Canadians can legally access a host of cannabis-infused products like beverages, vapes, and edibles.