Energy

Oil Rig Count Rose by 9 Last Week, Hedge Funds Pile Up Short Contracts

Paul Ausick

Published: June 18, 2016 9:35 am

Last Updated: January 13, 2020 6:39 am

In the week ended June 17, the number of rigs drilling for oil in the United States totaled 337, up by nine compared with the prior week and a total of 631 a year ago. Including 86 other rigs drilling for natural gas and one rig listed as “miscellaneous,” there are a total of 424 working rigs in the country, up 10 week over week and down 433 year over year. 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 July delivery traded up about 3.8% on Friday to settle at $47.98, down about 1.8% for the week, after posting a high of $49.28 on Monday. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had decreased by 900,000 barrels in the week ended June 10, and that gasoline supplies had dropped by 2.6 million barrels.

Global investment in new exploration and development is projected to drop by 30%, $370 billion, in 2016 and 2017. For the period 2015 to 2020, the decline is put at $740 billion by analysts at Wood Mackenzie. Principal analyst Malcolm Dickinson noted:

Virtually every oil producing country has seen some form of capex cuts. The deepest are in the US Lower 48, where forecast capital investment has halved in 2016-17, falling by US$125 billion. This is mainly down to a big drop-off in drilling, with the onshore rig count dropping by 53% from 2015 to 2016.

Wood Mackenzie expects a total of 7 billion oil-equivalent barrels will not be produced between 2016 and 2020 due to the low price of crude.

The number of rigs drilling for oil in the United States is down by 294 year over year and up by nine week over week. The natural gas rig count rose by one to 86. The count for natural gas rigs is down by 137 year over year. Natural gas for July delivery closed the week at $2.62 per million BTUs, up about two cents compared with the prior week. The low price for natural gas over the past 12 months is $1.94 per million BTUs.

U.S. refineries ran at 90.2% of capacity, a week-over-week decrease of about 100,000 barrels a day. Imports fell by about 83,000 barrels a day, to around 7.6 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 — added 26,672 short contracts last week, and dumped 13,221 long contracts. The movement reflects changes as of the June 14 settlement date. Managed money holds 268,734 long positions compared with 116,036 short positions. Open interest totaled 1,774,350. There were 51 hedge funds with large short positions last week, up by four compared with the prior week.

Among the producers themselves, short positions outnumber longs by nearly three to one, 457,036 to 181,567. The number of short positions fell by 8,868 contracts last week, and longs added just 37 positions. Positions among swaps dealers show 251,408 short contracts versus 2109,345 long positions. Swaps dealers added 1,861 contracts to their short positions last week and dropped 4,414 long positions.

Among the states, Texas added 13 rigs last week and West Virginia added two. Alaska and Louisiana each lost one rig.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count rose by four to 146. The Eagle Ford Basin in south Texas added four rigs to bring its total to 34, and the Williston Basin (Bakken) in North Dakota and Montana now has 24 working rigs, unchanged compared with the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $42.66 per barrel for WTI and a June 18 price of $43.61 a barrel for Eagle Ford crude. The price for both varieties fell by $2.86 a barrel over the past week.

The pump price of gasoline fell by about 1.6% week over week. Saturday morning’s average price in the United States was $2.341 a gallon, down from $2.379 a week ago. The year-ago price was $2.801 a gallon.