US Oil Rig Count Drops by 10; Short Positions Likely to Rise This Week

In the period ended December 4, the number of rigs drilling for oil in the United States totaled 545, compared with 555 in the prior week and 1,575 a year ago. Including 192 other rigs drilling for natural gas, there are a total of 737 working rigs in the country, down from 744 last week, and from 1,173 a year ago. The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count released on Friday.

Benchmark West Texas Intermediate (WTI) crude oil for February delivery closed last Friday at $41.71 and dropped more than 4% to close at $39.97 on a week later. An announcement following the semiannual meeting of OPEC ministers that the cartel would not cut production caused prices to tumble.

U.S. crude oil inventories rose by 1.3 million barrels last week, according the Energy Information Administration, adding to pricing pressure for crude. The U.S. crude oil inventory, excluding the Strategic Petroleum Reserve, now stands at 489.4 million barrels.

The number of rigs drilling for oil in the United States is down by 1,183 year over year and down by 10 week over week. The natural gas rig count rose by three to total 192 at the end of the week. The count for natural gas rigs is down by 152 year over year.

Gasoline stockpiles increased by 100,000 barrels last week and U.S. refineries ran at 94.5% of capacity, a week-over-week increase of 432,000 barrels a day.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — added 6,852 short contracts last week and 996 long contracts. The movement reflects changes as of the December 1 settlement date. Managed money holds 251,057 long positions, compared with 171,805 short positions. Open interest totaled 1,661,176. The number of hedge funds with large short positions rose to 67 last week. Comparisons with the short holiday are not particularly useful so they have been omitted. The sharp drop in the price last week is nearly certain to add up to more short positions added for the current week.

Among the producers themselves, short positions outnumber longs 366,048 to 157,123. The number of short positions last week rose by 10,677 contracts, and longs rose by 13,022 positions. Positions among swaps dealers show 250,324 shorts versus 246,377 longs. Swaps dealers dropped 4,398 contracts from their short positions last week and also cut 6,152 long contracts.

Among the states, Louisiana lost four rigs last week, Texas lost three rigs, North Dakota lost two and Colorado and Utah each lost one. Oklahoma and Wyoming each added two rigs.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count fell by four to a total of 217. The Eagle Ford Basin in south Texas remained unchanged at 73, and the Williston Basin (Bakken) in North Dakota and Montana now has 60 working rigs, down two from the prior week.
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Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $36.42 per barrel for WTI and a December 5 price of $32.05 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $36.37. The price for all three grades of crude fell by around $3 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 $2.042 a gallon, down less than 0.1% from $2.046 a week ago.