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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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Oil Relieved As Rig Count Shows Negligible Gain

The U.S. oil and gas rig count was up only one rig this week, defying a significantly higher upwards trend reported by Baker Hughes for multiple weeks running.

U.S. oil rigs were up three, while natural gas rigs were down two, bringing the total advance to one. Rig gains in Texas’ Permian basin were offset by losses elsewhere.

While this represents the fifth straight increase in the U.S. oil rig count, the pace has fallen from the previous week.

The oil price response has been lackluster and the Baker Hughes data follows a 20% drop in oil prices from recent highs as new concerns hit the market over an increase in the supply glut due to a revival in US production. The market is now bearish.

West Texas Intermediate (WTI) opened trading today at $41.12 and was hovering around $41.24 by midday. Brent crude opened at $43.14 and hit around $43.20 at the time of the rig count release.

 

(Click to enlarge)

Last week, the U.S. rig count was up 15 oil and gas rigs, nearly doubling the previous week’s rig increase and heralding new supply to add to the existing glut and push oil prices down further.

Texas has seen the biggest gains for the past two weeks, with all 15 new rigs last week brough on line here, and most significantly in the Permian basin, where eight new rigs were active.

The U.S. rig count took a major dive beginning in August 2015, but since May 2016 has started the climb back upwards.

The U.S. rig count is still down 411 from the same time a year ago.

By Charles Kennedy of Oilprice.com

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Leave a comment
  • Kr55 on July 29 2016 said:
    Judging by the producer results coming out, the increase of rigs was definitely jumping the gun. It's not like producers are 100% hedged, their new meagre hedges are just giving some extra revenue from existing production. The risk is still massive for any added production coming on, and DUCs still cost millions a piece to bring online and just requires more and more borrowing on top of the massive debts they have.

    Can't stop producers from being greedy and too optimistic, it's still up to lenders to be the responsible ones, and this last month is yet another lesson for lenders that have been too liberal allowing producers to live beyond their means.

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