Rig Counts Finally Chasing $60 and $65 Oil (BHI, USO, OIH, SLB)

It seems that the steady rise in oil prices is finally starting to support some stability in rig counts.  We just got some fresh weekly rig count data from Baker Hughes Inc. (NYSE: BHI) supporting some stability.  Prior weekly data was mixed on whether rig counts were really stabilizing, but the current data speaks for itself.  This may finally start to be reflected in the United States Oil (NYSE: USO) ETF, the Oil Services HOLDRs (OIH) and even in Schlumberger Limited (NYSE: SLB).

U.S. Rig Count is down 1 from last week at 899; down 978 year over year.

Canadian Rig Count is up 16 from last week at 90; down 86 year over year.

The US Offshore rig count is 55, up 1 from last week; down 12 year over year.

This is not exactly solid growth by any stretch.  But it seems that oil heading north of $60.00 and then above $65.00 briefly this week will start to offer drillers and rig operators enough of a floor underneath that might allow for sustained profitability on the domestic side.

Regardless of how green everyone tries to get, without more local drilling in North America we are never going to get off our perpetual dependence on foreign oil.

The United States Oil (NYSE: USO) ETF is up almost 2% at $35.98 today, and that gets it within striking distance of the January highs.  The Oil Services HOLDRs (OIH) ETF is up 1.8% at $105.90 as it is likely to see more underlying business activity in the ETF members if oil prices remain up here, and that implies higher rig counts.  Higher oil prices now have shares of Schlumberger Limited (NYSE: SLB) within striking distance of 2009 highs.

Jon C. Ogg
May 29, 2009