Baker Hughes Report Rise in Oil Rigs

US based oil driller, Baker Hughes, in its latest report stated that there has been an increase of 7 in the number of oil rigs as the number now sits at 425 for the week ending on the 30^th of September. This was the 16th week of increases out of the past 18, with one week during the stretch experiencing a decline and the other remaining unchanged. The number of gas-only rigs rose by 4 to 96. This brings the total number of active oil and gas rigs to 522, an increase of 11. The total count is lower by 287 from a year earlier, while the oil-only is down by 180.

Last week the oil-rig count rose 2 to 418, while the total rig count increased by 5 to 511. Oil had little response to today’s data. The November WTI futures contract is currently higher on the day by 0.54% to $48.08. The rig count continues to rebound, suggesting the oil market at the least has stabilized and will likely continue to do so or even trade higher in the months ahead. Major cycle tops and bottoms have typically found confirmation through the reversal in rig counts.

The market continues to search for a direction as it has been without one for several months, but with potentially good news from the supply side coming at the upcoming November OPEC meeting the backdrop for higher oil prices may soon strengthen and provide reason for renewed strength to emerge for the commodity.

"We have already seen that the $40-$50 oil price range of the past few months stopped the bleeding and even propelled a modest rebound in U.S. drilling and well completion activity," Shoemaker and Solecitto wrote in a Sept. 29 research note. "However, as we highlighted in our recent report on the pace of the North America drilling upturn ... the oilfield service companies have been unimpressed with the strength of the recovery and disappointed that it has not spread beyond a few basins in West Texas and Oklahoma."

That being said, KeyBanc sees average prices between $50 and $55 per barrel as enough to accelerate the drilling rally which it claims has been underway in North America since early summer. Indeed, U.S. exploration and production companies have put 107 oil and gas rigs back in operation since late May, after taking about 300 offline in the first half of the year and more than 1,100 in all of 2015, Baker Hughes data shows.

Longer-term, however, analysts forecast the rig count would jump higher in 2017 and 2018 when prices were expected to rise as bigger publicly-traded operators boost spending on drilling to increase production. Futures for calendar 2017 were trading above $51 a barrel, while calendar 2018 was above $53. Platts RigData, a forecasting unit of S&P Global Platts, projected total oil and natural gas land rigs would rise from an average of 449 in 2016 to 579 in 2017 and 676 in 2018 as energy prices increase. That compares with an average of 883 rigs in 2015.