Baker Hughes Reports Rise in Oil Rigs Count

Baker Hughes, a US based oil driller has reported a rise in the number of active oil rigs, the number edged higher by two to reach 418 in the week ending on September 23, In the last 17 weeks, this was the fifteenth week of growth, as one week was unchanged and the other week experienced a decline. There was also an increase in the number of gas only rigs as they grew by 3 to reach 92, bringing the total number of oil and gas rigs to 511, an increase of 5. The total count is lesser by 327 from a year earlier, with the number of oil only rigs lower by 196.

The oil rig count last week reported an increase of 2 to reach 416, as the total oil rig count fell by 2 to 506.

Oil prices showed very limited response to yesterday’s data release, the November WTI futures contract in yesterday’s trading session fell lower by over 4% to $44.34 after three days of consecutive gains.

The rig count continues to rebound, implicating the worst of the 2014-2016 bear market is over, as it has in the past turned within months of a major cycle low or high. The price swings in crude oil in recent weeks have left traders with little directional clues as to where the commodity is heading, but is generally holding steady in the $40 range. It will likely require a decline below $40 before concerns quell over the possibility of revisiting the 2016 lows.

Looking forward, analysts said they still expect the rig count to rise in 2017 and 2018 over 2016, but not by as much as a few weeks ago as future oil price forecasts hold in the $50 to $60 a barrel range. Futures for calendar 2017 were trading around $48 a barrel, while calendar 2018 was about $51.

"Based on a lower assumed price deck of about $50-60 for the next two years, we are moderating our exploration and production capital spending and activity growth assumptions," analysts at Simmons & Co, energy specialists at U.S. investment bank Piper Jaffray, said in a note.

Zero Hedge noted that oil prices had been in a down swing after Saudi Arabian and Iranian officials said they did not expect an output freeze deal to come to fruition during next week’s OPEC meeting in Algiers. The geopolitics of the civil wars in Yemen and Syria, as well as disagreements regarding the method of determining output levels during the length of freeze, caused the officials’ concern.

Brent barrel prices stood at $45.91 at the time of the report’s writing, and West Texas Intermediate traded at $44.51—a fall from Wednesday’s price after EIA inventory data revealed a massive 6.2 million barrel draw to crude inventory. Following the EIA’s report, West Texas Intermediate traded at $45.23 a barrel while Brent traded at $46.89.