Energy
Oil Rig Count Rises by 21, Hedge Funds Dump 66 Million Short Barrels
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In the week ended December 9, the number of rigs drilling for oil in the United States totaled 498 up by 21 compared with the prior week and down by 26 compared with a total of 524 a year ago. Including 125 other rigs drilling for natural gas and one rig listed as “miscellaneous,” there are a total of 624 working rigs in the country, up by 27 week over week and down 85 year over year. The data come from the latest Baker Hughes North American Rotary Rig Count released on Friday.
This is the largest weekly increase since April of 2014, when West Texas Intermediate (WTI) crude oil was trading at roughly double its current price.
WTI crude oil for January delivery traded up about 1.3% on Friday to settle at $51.48. Crude prices actually slipped about 0.2% week over week. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had decreased by 2.4 million barrels in the week ended December 2, and that gasoline supplies had risen by 3.4 million barrels.
As if to underscore the solid rise in crude prices since November 30, energy consultancy Wood Mackenzie said on Friday that it expects oil and gas exploration firms should return to profitability in 2017 and have a good chance of posting double-digit returns compared with the meager single-digit returns for the past five years.
Perhaps the most surprising statement in the firm’s outlook came from Vice President for Exploration Andrew Latham:
More than half of the volumes are expected to be found in deep water. Here some well costs will fall to US$30 million or less, with full-cycle economics that are positive at less than US$50 per barrel. …
The industry is focusing on acreage capture and re-loading for the longer term. Companies willing to sign acreage with firm 2017 wells may be spoilt for choice. A spate of new licensing in outer slope plays will continue as explorers digest news of better-than-expected reservoir quality and source rock potential in these ultra-deepwater settings.
The number of rigs drilling for oil in the United States is down by 26 year over year but up 21 week over week. The natural gas rig count increased by six to a total of 125. The count for natural gas rigs is down by 60 year over year. Natural gas for January delivery closed the week at $3.72 per million BTUs, up 26 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 — dropped 53,502 short contracts for WTI crude oil last week, and added 30,343 long contracts. The movement reflects changes as of the December 6 settlement date. Managed money now holds 351,457 long positions compared with 108,932 short positions. Open interest totaled 2,098,290. There were 41 hedge funds with large short positions last week, down from 48 in the prior week.
Managed money dropped 53.5 million barrels from their short positions and added 30.34 million barrels to their long positions last week. Adding in options, hedgies closed the reporting period holding more than 350 million barrels on long contracts compared with just 80 million short contracts.
Among the producers themselves, short positions outnumber longs 595,937 to 323,194. The number of short positions rose by 41,846 contracts last week, and longs added 32,473 contracts. Positions among swaps dealers show 296,009 short contracts versus 169,391 long positions. Swaps dealers added 42,242 contracts to their short positions last week and dropped 43,061 contracts from their long positions.
U.S. refineries ran at 90.4% of capacity, a week-over-week increase of about 134,000 barrels a day. Imports rose by about 755,000 barrels a day, to over 8.3 million barrels a day in the week.
Among the states, Texas added 17 rigs last week, Colorado added six, Wyoming added three, Pennsylvania added two and four states — Arkansas, Kansas, New Mexico, and North Dakota — added one rig each. Alaska, Louisiana and Oklahoma each lost one rig last week.
In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 246, up 11 compared with the previous week’s count. The Eagle Ford Basin in south Texas has 43 rigs in operation, up by three week over week, and the Williston Basin (Bakken) in North Dakota and Montana now has 32 working rigs, up one for the week.
Enterprise Products Partners lists a December 3 posted price of $47.95 per barrel for WTI and $49.40 a barrel for Eagle Ford crude. The price for WTI and Eagle Ford crudes fell by 18 cents a barrel in the week.
The pump price of regular gasoline rose by more than three cents a gallon week over week. Saturday morning’s average price in the United States was $2.205 a gallon, up $0.033 compared with $2.172 a week ago. The year-ago price was $2.010 a gallon.
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