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:
- U.S. Rig Count down 46 from last week at 1,039; down 769 year over year.
- Canadian Rig Count down 55 from last week at 104; down 67 year over year.
- The US Offshore rig count is 41, down 2 from last week; down 19 year over year.
Here were last week’s counts:
- U.S. Rig Count down 41 from last week at 1,085; down 699 year over year.
- Canadian Rig Count down 61 from last week at 159; down 169 year over year.
- The US Offshore rig count is 43, down 4 from last week; down 14 year over year.
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