In the week ended October 23, the number of rigs drilling for oil in the United States totaled 594, compared with 595 in the prior week and 1,595 a year ago. Including 193 other rigs drilling for natural gas, there are a total of 787 working rigs in the country, flat week over week and down 1,140 year over year. The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count.

West Texas Intermediate (WTI) crude oil for December delivery dropped about $3 a barrel over the past five days to close the week down by about 5.6% at $44.60. Brent crude closed at $48.10 on Friday.

Last week ended a string of seven consecutive weekly declines in the U.S. rig count.

Several U.S. producers had their base reserve calculations reappraised last week. This happens twice a year, in the spring and in the fall, and a company’s bank uses the reserve calculation to determine the borrowing limit on the company’s credit lines. Of 17 companies reported to have gone through the redetermination, the average reduction in borrowing capacity came to just 4%.

Of the 17 listed by RBN Energy, three had their credit lines increased, eight were able to maintain their existing credit lines and another two took reductions of 10% or less. Callon Petroleum, EV Energy Partners, and GulfPort Energy received increases of 20%, 25% and 22%, respectively. Among those that had no reduction were Bill Barrett, Chesapeake Energy and SandRidge.

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The largest cut was made at New Source Energy, where the credit line was reduced 51%, from $49 million to $24 million. Emerald Oil’s credit line was cut 40% and Resolute Energy’s line dropped 39%.

One reason that the reserve calculations resulted in a relatively small change is the falling cost of drilling and completion. Continental Resources, one of the Bakken’s largest producers, has cut its drilling and completion costs by 45% since last year. Devon Energy, a major producer in the Permian Basin, cut its costs by 30% and SM Energy cut its Eagle Ford costs by a like amount.

The sharp reduction in costs has mitigated somewhat the sharp drop in crude oil prices: the oil may be worth less, but it is also much cheaper to get out of the ground. What remains to be seen is how long this situation can last.
The number of rigs drilling for oil in the United States is down by 1,001 year over year, and down by one from a week ago. The natural gas rig count rose by one to 193. The count for natural gas rigs is down by 139 year over year.

Gasoline stockpiles decreased by 1.5 million barrels last week. U.S. refineries ran at 84.6% of capacity, a week-over-week increase of 78,000 barrels a day. That marks the first increase in throughput in five weeks.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — added 18,975 short contracts last week and shed 3,574 long contracts. The movement reflects changes as of the October 20 settlement date. Managed money holds 266,363 long positions, compared with 106,570 short positions. Open interest decreased by 32,389 contracts to 1,613,562 week over week. Open interest has declined by about 60,000 contracts over the past two weeks. The number of hedge funds with large short positions rose from 51 to 53 last week and now equals the number of funds with large long positions.

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Among the producers themselves, short positions outnumber longs, 369,669 to 169,869. The number of short positions last week fell by 20,907 contracts and longs tumbled by 35,091 positions. Positions among swaps dealers show 281,548 shorts versus 217,982 longs. Swaps dealers cut 14,738 contracts from their short positions last week and added 10,947 long contracts.

Among the states, Texas dropped five rigs last week while Kansas and Pennsylvania each dropped two and New Mexico and West Virginia shed one each. Louisiana added five rigs, Ohio added two and Alaska and Oklahoma added one each.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count fell by four to 229. The Eagle Ford Basin in south Texas added one rig to bring its count to 77, and the Williston Basin (Bakken) in North Dakota and Montana now has 64 working rigs, flat with the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $41.05 per barrel for WTI and an October 24 price of $35.72 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $41.00. The price for all three crude grades fell by $2.66 a barrel in the past week.

The pump price of gasoline decreased week over week. Saturday morning’s average price in the United States was $2.211 a gallon, down about 2.6% from $2.27 a week ago.

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