Oil Rig Count Up by 10 Last Week, Hedge Funds Add to Short Positions

Energy

Published: July 9, 2016 9:35 am

Last Updated: January 13, 2020 5:55 am

In the week ended July 8, the number of rigs drilling for oil in the United States totaled 351, up by 10 compared with the prior week and a total of 645 a year ago. Including 88 other rigs drilling for natural gas and one rig listed as “miscellaneous,” there are a total of 440 working rigs in the country, up nine week over week and down 423 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 August delivery traded up less than 1% on Friday to settle at $45.41, down 7.3% for the week after posting a weekly high of $49.35 on Tuesday. The U.S. Energy Information Administration (EIA) reported last Thursday that crude supplies had decreased by 2.2 million barrels in the week ended July 1, and that gasoline supplies had dropped by 100,000 barrels.

U.S. refiners are having a tough go right now. Crude stockpiles remain high and, while the refiners want to work their inventories down, it has become difficult for them to do so because gasoline stockpiles also remain stubbornly high. According to a report at Reuters, gasoline stockpiles are near their highest levels in a decade even after adjusting for record demand from U.S. drivers.

Hedge funds are encouraging refiners to take advantage of the current crack spreads favoring distillate (diesel fuel and heating oil) by producing more of these and less gasoline. That’s the way the hedgies are betting, and the concern is that the spreads will close as the funds move to take some profits.

The number of rigs drilling for oil in the United States is down by 294 year over year and up by 10 week over week. The natural gas rig count fell by one rig to 88. The count for natural gas rigs is down by 129 year over year. Natural gas for August delivery closed the week at $2.82 per million BTUs, down about 17 cents compared with the prior week.

U.S. refineries ran at 92.5% of capacity, a week-over-week decrease of about 8,000 barrels a day. Imports rose by about 808,000 barrels a day, to around 8.4 million barrels a day in the week.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission’s (CFTC) weekly Commitments of Traders report — added 9,485 short contracts last week and 2,239 long contracts. The movement reflects changes as of the July 5 settlement date. Managed money holds 278,085 long positions compared with 132,720 short positions. Open interest totaled 1,751,823. There were 61 hedge funds with large short positions last week, up by eight compared with the prior week.

Among the producers themselves, short positions outnumber longs by more than two to one, 467,686 to 204,086. The number of short positions rose by 3,397 contracts last week, and longs rose by 10,175 contracts. Positions among swaps dealers show 244,439 short contracts versus 203,002 long positions. Swaps dealers dumped 5,384 contracts from their short positions last week and 8,376 contracts from their long positions.

Among the states, Texas added three rigs last week while New Mexico and North Dakota added two each. Louisiana, Oklahoma and Wyoming each added one rig, and Kansas lost one.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count rose by four to 158. The Eagle Ford Basin in south Texas remained unchanged at 33, and the Williston Basin (Bakken) in North Dakota and Montana now has 28 working rigs, a gain of two compared with the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $41.86 per barrel for WTI and a July 9 price of $42.81 a barrel for Eagle Ford crude. The price for both varieties dropped by $3.58 a barrel over the past week.

The pump price of gasoline fell by about 1.5% week over week. Saturday morning’s average price in the United States was $2.244 a gallon, down from $2.278 a week ago. The year-ago price was $2.756 a gallon.

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