Energy
Fewer & Fewer Rigs, More Foreign Oil Dependence (BHI, OIL, USO)
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It appears that oil stability and a large percentage rise off of lows is not enough for drillers. Baker Hughes Inc. (NYSE: BHI) released its weekly total rig counts for the US and Canada and for offshore rigs. Again, despite the notion that oil is now back above $50.00 and despite calls to get off foreign energy dependence the drilling rigs in North America are falling. And falling. It still looks like Canada is getting out of the oil industry entirely. Here are this week’s new rig counts showing how far these keep getting idled:
Here were last week’s counts:
The iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL) is down almost 4% at $24.00, and the US OIL ETF (NYSE: USO) is down 4% at $30.74.
T. Boone Pickens recently made the call of “$60 before $40″ when oil was barely above $40.00 at the time. OPEC doesn’t need to debate whether they should be cutting production with these cuts. WEe are cutting production more than enough for them. Demand erosion is real, but these rig counts keep coming down at what seems far more than demand is dropping.
It would be a stretch to believe that the administration would come up with new drilling incentives. Whether we want to end up entirely using solar and nuclear and other forms of alternative energy entirely, the reality is that oil use is going to be around as long as we are all still alive. The question is just how much of it will be used. It looks like foreign energy dependence is going to continue, so you might as well capitalize off of it.
Jon C. Ogg
March 27, 2009
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