(Cut) Amounts > (Rig) Counts=Price Bounce

By: Greg Gill / February 27, 2017

Baker Hughes released the most recent rig count this week, and no surprise, it’s continuing to increase. With OPEC production cut compliance at an estimated 90% and increasing price, shale producers are drilling at a rapid pace.  Over the last two weeks, the U.S. shale rig count has increased by 15 and reached the highest amount since October 2015.  The total number of shale rigs is currently at 602 and this is the sixth straight week that the rig count has gone up.  How does this compare to last year?  This time last year we had 202 fewer active rigs in the U.S.  Given the most recent drop in natural gas prices, though, the gas rig total has decreased by only two rigs to 151 total.  The oil industry is watching closely as the major OPEC producers are cutting production and continuing to say they will have more cuts in the future. U.S. production grows stronger day-by–day, riding the coat tails of oil pricing. 

Rig Count-1.png

As we discussed last week in this space, the EIA projected the U.S. to produce 9 million barrels per day this year, and as of last week production has begun to surpass this figure. Business Insider’s Akin Oyedele says, “After the rig-count release, West Texas Intermediate crude futures for April delivery were down by 0.8% to $54.02 per barrel, but on track for a weekly gain. Prices rallied on Tuesday after OPEC said it was sticking to the deal and was determined to achieve a higher level of compliance than agreed.”  Along with this, Reuters reports that the U.S. Commodity Futures Trading Commission, or CFTC, has raised its U.S. crude future and option positions to the highest on record.  Reuters estimates that U.S. investors currently hold nearly 1 billion barrels of oil, or a value of $52 billion, within their 951,312 lots in the U.S.  These figures are based off of current Brent and WTI benchmark pricing. 

With all this optimism there is also a flip side to the coin. What if OPEC compliance drops?  Or even, what if OPEC decides to only hold to 6 months of cuts rather than a full year?  This could be a very delicate situation if either of these scenarios comes to fruition.  Stephen Brennock from PVM said, “With speculators increasing their bullish bets on U.S. crude to an all-time high, the risk of disappointment and subsequent downward spiral in prices has never been greater."

More information regarding current rig levels can be found at http://www.wtrg.com/rotaryrigs.html.

Categories: Daily Market Update

Greg Gill

Written by

Greg Gill

I’m passionate about fully understanding my customers’ fuel operations and the fuel markets in which they operate. I want them to view me as their fuel expert. To develop strong, trusting partnerships with customers, I have to provide them with meaningful and timely information to ease the challenges of making smart fuel decisions, allowing them to focus on their core business.

Guttman Energy Daily Market Update Disclaimer – The information contained in this market update is derived from sources believed to be reliable; however this update could include technical inaccuracies or typographical errors and Guttman Energy does not guarantee the accuracy, completeness or reliability of this update. FURTHERMORE, THIS UPDATE IS PROVIDED "AS IS," WHERE IS, WITH ALL FAULTS AND WITHOUT ANY WARRANTY OR CONDITION OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY. GUTTMAN ENERGY ALSO SPECIFICALLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES. YOU USE THIS UPDATE AT YOUR SOLE RISK. This update and any view or comment expressed herein are provided for informational purposes only and should not be interpreted in any way as recommendation or inducement to buy or sell products, commodity futures or options contracts.


Subscribe to our blog

Price Feed

Stay up-to-date on current fuel prices and market trends with our NYMEX price feed (15 minute delay to the live market).

© 2018 Market data provided and hosted by Barchart Market Data Solutions. Fundamental company data provided by Morningstar and Zacks Investment Research. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer.


Contact Us