In the week ended January 20, 2017, the number of rigs drilling for oil in the United States totaled 559, up by a whopping 29 compared with the prior week and up 41 compared with a total of 510 a year ago. Including 142 other rigs drilling for natural gas and one rig listed as “miscellaneous,” there are a total of 694 working rigs in the country, up by 35 week over week and up by 57 year over year. The data come from the latest Baker Hughes North American Rotary Rig Count released on Friday.

The 35 drilling rigs added last week is the largest weekly total increase in five years. Nearly 300 rigs have been added in the United States since last spring.

West Texas Intermediate (WTI) crude oil for February delivery traded down up 1.9% on Friday to settle at $52.33. Crude prices increased by a scant 0.1% week over week. Friday was also the last trading day for the February contract. The contract for March delivery closed up 2.2% at $53.24, up nine cents for the week.

The U.S. Energy Information Administration (EIA) reported last Thursday that crude supplies had increased by 2.3 million barrels in the week ended January 13, and that gasoline supplies had jumped by 6 million barrels.

When the International Energy Agency (IEA) issued its monthly report last week, the agency’s chief, Fatih Birol, noted that “the name of the game [in the oil markets] is volatility.” That’s hardly a keen insight because crude prices vary literally from second to second or decade to decade, or on any time scale you want to name.

Last week was a good example of the volatility that makes money for traders and what it means for producers and consumers. WTI for March delivery added just seven cents a barrel in last week’s foiur trading sessions and closed the week 13 cents a barrel below the level of the February contract’s closing price on January 13. The high for the week was above $53.50 and the low was below $51.00.

For traders there’s a lot of money to be made in that $2.50 swing. For producers, though, not so much. And for consumers, short-term volatility means less. Between last January and now, crude prices have doubled, but pump prices are up about 45 cents or so from around $1.85 a gallon.

For consumers and producers, crude prices in a relatively narrow band of, say, $50 to $60 is acceptable. That means that pump prices won’t vary a whole lot either up or down. And for traders, well, there’s still enough volatility to make money.

The natural gas rig count increased by six to a total of 142. The count for natural gas rigs is now up by 15 year over year. Natural gas for February delivery closed the week at $3.20 per million BTUs, down 22 cents on the near-month contract compared with the prior week.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission’s (CFTC’s) weekly Commitments of Traders report — added 5,871 short futures and options contracts for WTI crude oil last week, and added 49,472 long contracts. The movement reflects changes as of the January 17 settlement date. Managed money now holds 406,723 long positions compared with 57,213 short positions. Open interest totaled 2,841,988. There were 44 hedge funds with large short positions last week, down three from the prior week.

Among the producers themselves, short positions outnumber longs 677,479 to 416,777. The number of short positions rose by 1,511 contracts last week, and longs dropped 2,396 contracts. Positions among swaps dealers show 386,759 short contracts versus 122,152 long positions. Swaps dealers added 5,294 contracts to their short positions last week and added 2,877 contracts to their long positions.

U.S. refineries ran at 90.7% of capacity, a week-over-week decrease of about 639,000 barrels a day. Imports fell by about 674,000 barrels a day, to about 8.4 million barrels a day in the week.

Among the states, Texas added 17 rigs last week, Oklahoma added seven, North Dakota added three, Ohio added two, and four states — New Mexico, Pennsylvania, Utah, West Virginia — each added one rig. No state lost a rig last week.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 281, up 13 compared with the previous week’s count. The Eagle Ford Basin in south Texas has 49 rigs in operation, up by two from last week, and the Williston Basin (Bakken) in North Dakota and Montana now has 352 working rigs, up three for the week.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Enterprise Products Partners lists a January 21 posted price of $48.87 per barrel for WTI and $50.32 a barrel for Eagle Ford crude. The price for WTI and Eagle Ford crudes rose by $0.05  a barrel in the week.

The pump price of regular gasoline fell by more than three cents a gallon week over week. Saturday morning’s average price in the United States was $2.319 a gallon, compared with $2.347 a week ago. The year-ago price was $1.858 a gallon.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.