Oil Prices Fall Further As U.S. Rig Count Inches Higher

This week's Baker Hughes rig count is the fourteenth in the string of weekly reminders that US shale will not succumb to the price pressure that OPEC has placed on it. In its fourteenth straight climb, US oil rigs rose another five this week, while gas rigs increased by five as well.

The steady stream of rigs being brought online in the US have dampened much of the optimism OPEC emitted over the last week, as OPEC heavyweights such as Saudi Arabia-whose budgets are tied inextricably to oil-desperately tried to assuage oil markets by strategically suggesting that a consensus may already exist among OPEC members to extend production cut beyond June.

The price of oil was immune to this round of OPEC's kind-word offerings-or rather "recoiled" would be a more apt description. This week saw WTI and Brent benchmarks plummet as the market grows increasingly concerned over ballooning crude oil stockpiles and peppy rig counts, week after week-further evidence that OPEC just doesn't have what it takes anymore to prop up the markets.

(Click to enlarge)

While the rally post-OPEC agreement announcement in November was impressive, as shown in the chart below…

… faith in the cartel began to waver last month, despite its stellar adherence to the OPEC agreement as promised. Prices have now reverted, losing about half of what had been gained since December.

But OPEC is not throwing in the towel just yet, as more rumors surfaced today saying that an OPEC and non-OPEC technical committee recommended an extension for another six months.

The number of active oil rigs in the United States now stands at 688 - 345 rigs higher than the figure one year ago. The last time oil rigs were this high was two years ago this week.

The total oil and gas rig count now stands at 857, or 426 more than a year ago today.

Both benchmarks were trading down on the day pre-data release, with WTI off by a staggering $1.02 per barrel-or 2.01%, and Brent crude down $0.91 or 1.72%.

The seductive Permian Basin-offering profits at even $40-something per barrel increased only by one this week, but has brought on almost 50 rigs in the last three months, as drillers flock to the basin despite the rising cost of acreage there. The Eagle Ford basin, which has fallen a bit out of the limelight thanks to the Permian, gained three rigs this week, and now sits at 78 rigs total, to the Permian's 340.

Canada lost 19 oil and gas rigs this week, but still sits at 59 above last year's count.

By Julianne Geiger for Oilprice.com

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