Energy

Oil Rig Count Flat Last Week, Hedge Funds Dump Short Bets

Paul Ausick

Published: May 21, 2016 9:35 am

Last Updated: January 13, 2020 7:46 am

In the week ended May 20, the number of rigs drilling for oil in the United States totaled 318, unchanged compared with the prior week, and 660 a year ago. Including 85 other rigs drilling for natural gas, there are a total of 404 working rigs in the country, down week over week by two and down 481 year over year. There is one rig listed as “miscellaneous.” The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count released on Friday.

West Texas Intermediate (WTI) crude oil for June delivery traded down about 1.1% on Friday to settle at $47.67, up about 3.3% for the week. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had increased by 1.4 million barrels in the week ended May 13 and that gasoline supplies had dropped by 2.5 million barrels.

Early last week analysts at Goldman Sachs declared that the supply glut is over and that demand is now outstripping supply. The firm, a notorious bear on oil, did say that its latest forecast reflects its view that long-term surpluses create short-term shortages (aka, backwardation), and that leaves the firm cyclically bullish by long-term bearish.

24/7 Wall St.
10 Stocks to Own for the Decade

The wildfire in Alberta has charred some 1.2 million acres, an area six times the size of New York City, and oil producers, hoping to get some production going again, were disappointed when officials ordered more evacuations. Reuters reported on Friday that production has or soon will restart at some locations, but Syncrude, one of the two largest producers in the region, has told customers to expect no more crude shipments in May.

Last week’s 3.3% price increase was abetted by growing outages in Nigeria, where as much as 900,000 barrels a day have been halted. In Libya, a disputed export terminal has been reopened and at least one cargo of 660,000 barrels has departed. The two actions don’t exactly offset, but the restart in Libya, if it lasts, could remove one of the props holding prices up.

The number of rigs drilling for oil in the United States is down by 341 year over year and unchanged week over week. The natural gas rig count fell by two rigs to 85. The count for natural gas rigs is down by 137 year over year. Natural gas for June delivery closed the week at $2.05 per million BTUs, down almost 2% compared with the prior week. The low price for natural gas over the past 12 months is $1.84 per million BTUs.

U.S. refineries ran at 90.5% of capacity, a week-over-week increase of about 192,000 barrels a day. Imports rose by about 22,000 barrels a day, to around 7.7 million barrels a day in the week.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — dumped 20,594 short contracts last week and added 9,501 long contracts. The movement reflects changes as of the May 17 settlement date. Managed money holds 294,071 long positions compared with 72,245 short positions. Open interest totaled 1,698,980. There were 42 hedge funds with large short positions last week, down by 11 compared with the prior week. The funds dumped as many short positions last week as they had added in the previous week. Long is the bet for now.

Among the producers themselves, short positions outnumber longs by about three to two, 486,146 to 190,853. The number of short positions fell by 6,914 contracts last week, and longs dropped by 18,673 positions. Positions among swaps dealers show 275,385 short contracts versus 219,249 long positions. Swaps dealers added 30,554 contracts to their short positions last week and dropped 17,495 long positions.

Among the states, Texas has eight fewer rigs while Kansas and North Dakota lost one each last week. Louisiana added seven rigs, and Colorado and Oklahoma added one each.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count rose by three to 137. The Eagle Ford Basin in south Texas dropped two rigs for a new total of 31, and the Williston Basin (Bakken) in North Dakota and Montana now has 23 working rigs, down one compared with the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $44.20 per barrel for WTI and a May 21 price of $45.15 a barrel for Eagle Ford crude. The price for both varieties rose by $1.54 a barrel over the past week. Crude has gained $2.99 a barrel in the past two weeks. Enterprise has not posted a price for North Dakota Light Sweet for the past five weeks.

The pump price of gasoline rose by about 2.7% week over week. Saturday morning’s average price in the United States was $2.279 a gallon, up from $2.220 a week ago. The year-ago price was $2.731 a gallon.