In the week ended May 8, the number of rigs drilling for oil in the United States totaled 668, compared with 679 in the prior week and 1,528 a year ago. Including 226 other rigs mostly drilling for natural gas, there are a total of 894 working rigs in the country, down 11 week-over-week and down 961 year-over-year. The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count.

The number of rigs drilling for oil fell by 860 year-over-year and by 11 week-over-week. The natural gas rig count slipped by one in the past week to a total of 221. The rig count for natural gas rigs is down by 102 year-over-year.

In the first week of March this year, the number of rigs drilling from oil onshore in the United States fell by 64. Since late November of last year, more than 1,000 rigs have been idled. In less than five months, the country lost more than half of all its oil rigs. While the number is remarkable, even more remarkable is the speed with which the spigot has been turned off. We may be about to find out how quickly that spigot can be turned back on.

Since touching a bottom of near $46 in mid-March, crude oil futures prices have posted a weekly gain in every week that followed. West Texas Intermediate (WTI) for June delivery rose to around $62 last week, the highest price since December. This is the strongest signal yet to producers that demand is returning, and as demand returns so will production.

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Both Pioneer Natural Resources Inc. (NYSE: PXD) and EOG Resources Inc. (NYSE: EOG) have said they are preparing to resume drilling as the price for crude reaches a point where profits may return. EOG even named its price: $65 a barrel. Pioneer said it is currently looking to begin drilling again in July.

Crude prices rose by just 0.5% last week to close out the week at around $59.47. Crude stockpiles fell by 3.9 million barrels last week, an unexpectedly large decrease. However gasoline stockpiles rose by 400,000 barrels as refineries were running at 93% of capacity. As refiners draw down on stockpiles of crude in storage, producers will answer the call to put more barrels into the tanks. The trick will be finding the right balance, where prices are high enough for producers to make a profit, but still moderate enough to keep drivers from parking their vehicles again.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) Commitments of Traders report — increased their long positions by about 1,500 contracts last week and reduced their short positions by about 7,500 contracts. The decreases reflect changes due to the May 5 settlement date. Managed Money holds 340,604 long positions, compared with 74,294 short positions.

Among the producers themselves, short positions outnumber longs, 398,478 to 233,630. But the number of new long positions last week was double the number of new shorts. Positions among swaps dealers show 360,469 shorts versus 196,807 longs. Swaps dealers increased their short positions by a total of nearly 17,000 contracts last week.

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The states losing the most rigs last week were Oklahoma (six) and Louisiana (three). Colorado added two rigs and North Dakota added one rig last week, the only states to post a weekly gain.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count dropped by one to bring the total down to 237. The Eagle Ford Basin in south Texas lost five rigs and reports that 105 are working, while the Williston Basin (Bakken) in North Dakota and Montana has 80 working rigs, the same as the prior week.

As of Friday, the posted price for Williston Basin sweet crude remained flat with the prior week at $48.44 a barrel, and Williston Basin sour also stayed flat at $43.83 a barrel. Eagle Ford Light crude was flat at $55.75 a barrel, the same price as WTI.

The price of gasoline increased over the week. Saturday morning’s average price in the United States was $2.660 a gallon, up about 2% from $2.607 a week ago.

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