Baker Hughes Reports Rise in Oil Rigs

Baker Hughes, an American industrial service company,  one of the world's largest oil field services companies reported that the number of active oil rigs have grown by 7 from 407 to 414 for the week that ended on the 2^nd of September. In the past 15 weeks, this is the 13^th week of increase, with one of the week’s staying unchanged and one other week reporting a decline. After rising by 7 last week, the number of gas-only rigs grew by 4 settle at 88 after it jumped by 7 last week. The tally for the total number of active oil and gas rigs now sit at 508 with a rise of 11, 340 rigs lower than it was in the previous year as oil-only rigs are now lower by 230.

Oil rig count last week grew by 1 to 407, while the total rig count increased by 8 to 497.

In a note on Friday, Morgan Stanley analysts wrote that the recent gain in the US oil-rig count is one of the reasons why they are losing conviction in their call for a re-balancing of the market by mid-2017. A re-balancing would bring supply, which is in excess right now, more in line with demand, which has room to increase.

"The US continues to surprise, and the market seems to be underestimating the impact of some rigs that have already been added," Adam Longson and his team wrote.

On Friday, U.S. crude was trading at above $46 a barrel, close to the $50-mark that analysts and drillers say makes drilling more viable. Futures for calendar 2017 were trading over $50.

"We anticipate slow rig growth with all of the usual price caveats," said James Williams, president of energy consultant WTRG Economics in Arkansas. "If oil prices continue to rise, the rig count will continue to rise and U.S. production will stop declining and start to increase," Williams said, noting there is typically a two-month lag between prices increasing and rigs entering service.

In reaction to the data, the market witnessed a small drop lower to the lows of yesterday’s session in the moments after the release and then it later dropped further. The October WTI futures contract has currently fallen by nearly 3% to $46.24.

In the past week the price of crude oil has experienced a strong surge, rising from $43 on September 1 to a high of $47.75 yesterday before today’s pullback. On Thursday, the Energy Information Administration reported a massive draw in stockpiles. The weekly inventory report showed a draw of 14.5 million barrels, just shy of the record draw of 15.2 million barrels seen in January 1999.