Weekly U.S. Oil Rig Count: Still In Holiday Mode

| About: The United (USO)
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Summary

The oil rig count keeps increasing.

There was one new oil rig in the Gulf of Mexico, which is important given higher productivity.

There was material activity in the natural gas rig count.

At some point in the near future, the rate of increase in domestic production should accelerate.

Another sleepy holiday week with no major changes across basins, but with the usual increase in the Permian where, as we indicated last week, the rig count now has more than doubled from the bottom. Natural gas producers, on the other hand, were back to work, with one rig increase in each of the major basins: Barnett, Haynesville, Marcellus and Utica.

There was some volatility in crude oil prices (NYSE: USO) during the week, most remarkably a big drop after the EIA weekly inventory numbers showed a very large increase in product inventories, but at the close on Friday, crude oil prices ended virtually unchanged vs the previous week.

Source: Finviz.com

Data:

Source: Baker Hughes

* Total U.S. oil rig count increased by 4, with small increases in the Permian, a moderate increase in the 'Other' region, which includes one new rig in the Gulf of Mexico, and a 4 rig drop in Granite Wash, which in the last 8 months had been quietly adding numerous rigs.

In total, oil rigs are up by 67.5% since the bottom in late May 2016. Virtually all of the rigs added have been horizontal.

* Horizontal rigs increased by2 during the week. The horizontal rig count is up by 70% since the bottom in late May.

Source: Baker Hughes, Orangutan Capital

Although the oil rig count did not increase by much, there were a couple rigs added in the Permian and one new rig in the Gulf in Mexico, combined with several rigs in the 'Other' region and a 4 rig drop in Granite Wash.

* The Permian oil rig count increased by 3. During November and December alone, the rig count increased by almost 30%. In total, since the bottom in late April / early Mary, the rig count in the Permian has increased by 102%.

* There was a drop of 4 oil rigs in Granite Wash,

* There was an increase of one rig in the Gulf of Mexico.

* There were three new natural gas rigs added during the week, with one rig added in each of the Barnett, Haynesville, Marcellus and Utica shales (and a drop of one rig in the 'Other' region).

Conclusion:

Another quiet week, with some activity in the Permian, one new rig in the Gulf of Mexico, but 3 new natural gas rigs including one rig in each of the major natural gas producing basins. As we mentioned during the last report, the rig count increase in the Permian has now more than doubled since the bottom in late April/early May. With oil firmly established in the $50s/bbl level, we should expect to see new rigs added and at some point a small acceleration in the rate of increase of domestic production.

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.