Baker Hughes published the latest oil rig count today—and although not surprising, the news that the oil rig count fell for the eighth straight week in a row is not good.
U.S. oil rig counts fell by 10 from May 6, 2016, down to 318. Although a 3.0% drop from last week isn’t a huge loss for the U.S. oil industry, when compared to the rig count last year of 660, the 50 percent drop—a new record low—signifies a definitive new oil picture.
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But the bad news for oil doesn’t stop there. This eight-week free fall may be a harbinger of worse things to come. As zerohedge captured in the graphic below, the oil rig count logically corresponds to the working number of oil rigs—with an 18-month lag.
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What’s missing from this graph is the blue oil-production line that may very well dip just as horrifically as the oil rig count, meaning that U.S. production could fall 50 percent within the next 18 months.
In similar discouraging events, the global oil and gas rig count as of the end of April doesn’t look much rosier, after losing 39 rigs to 946, down from the 985 mark in March 2016. To add perspective, this figure is 436 rigs less than peak levels in July 2014. This rig count does not include the U.S., Canada, any of the FSU (former Soviet Union) countries or mainland China. Related: Holding 30% Of June Brent Crude Contracts, Is Glencore Manipulating Oil Prices
On a small high note, the U.S. natural gas rig count managed to eke out a single rig increase over last week, up to 87, bringing the total U.S. oil and gas rig count to 406.
By Charles Kennedy of Oilprice.com
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