Energy

Oil Rig Count Drops by 31, Hedge Funds Pile Up Short Positions

Paul Ausick

Published: February 6, 2016 9:25 am

Last Updated: January 13, 2020 1:33 pm

In the week ended February 5, the number of rigs drilling for oil in the United States totaled 467, compared with 498 in the prior week and 1,140 a year ago. Including 104 other rigs drilling for natural gas, there are a total of 571 working rigs in the country, down 48 week over week and down 885 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 March delivery traded down about 2.3% on Friday to settle at $31.00, a drop of about 8% for the week. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had increased by 7.8 million barrels in the week ended January 29 and that gasoline supplies had risen by 5.9 million barrels.

Last week’s drop in crude prices has more to do with the weaker dollar than it does with the oversupply the black stuff. The dollar index (DXY) dropped from a weekly high of 99.63 on Monday to settle Friday at 96.96. The euro gained slightly more than 3% against the dollar. This rise kept the price of crude in dollars from falling far harder than it ultimately did.

The number of rigs drilling for oil in the United States is down by 673 year over year and down by 31 week over week. The natural gas rig count dropped by 17, from 121 to 104. The count for natural gas rigs is down by 210 year over year. Natural gas for March delivery closed the week at $2.06 per million BTUs, down 24 cents from $2.30 at the end of the prior week.

U.S. refineries ran at 86.6% of capacity, a week-over-week decrease of about 24,000 barrels a day. Imports rose to 8.3 million barrels a day in the week, a week-over-week increase of 647,000 barrels a day.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — added 15,097 short contracts last week and 4,283 long contracts. The movement reflects changes as of the February 2 settlement date. Managed money holds 272,485 long positions, compared with 206,215 short positions. Open interest totaled 1,855,603. There were 73 hedge funds with large short positions last week, an increase of three compared with the prior week.

Among the producers themselves, short positions outnumber longs, 467,613 to 224,224. The number of short positions rose by 25,287 contracts last week and longs rose by 34,955 positions. Positions among swaps dealers show 189,782 shorts versus 227,385 longs. Swaps dealers dropped 1,606 contracts from their short positions last week and 7,710 long contracts.

Among the states, Texas dropped 19 rigs last week, Oklahoma lost eight, Louisiana dropped five, Pennsylvania dropped three and New Mexico, Utah and Wyoming each lost two. Ohio dropped one rig, and no state added a rig during the week.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count fell by two to a total of 180. The Eagle Ford Basin in south Texas dropped four to a new total of 60, and the Williston Basin (Bakken) in North Dakota and Montana now has 42 working rigs, down two from the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $27.34 per barrel for WTI and a February 6 price of $20.60 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $27.29. The price for WTI and Eagle Ford crude fell by about $2.75 a barrel in the past week and North Dakota Light Sweet fell about $2.60 a barrel.

The pump price of gasoline fell by about 2.9% week over week. Saturday morning’s average price in the United States was $1.752 a gallon, down from $1.804 a week ago.