Energy

Oil Rig Count Slips Again and Hedge Funds Move Out of Oil

Paul Ausick

Published: January 23, 2016 9:20 am

Last Updated: January 13, 2020 2:41 pm

In the week ended January 22, the number of rigs drilling for oil in the United States totaled 510, compared with 515 in the prior week and 1,317 a year ago. Including 127 other rigs drilling for natural gas, there are a total of 637 working rigs in the country, down 13 week over week and down 996 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 February delivery traded down up 9% on Friday to settle at $32.25, a rise of 9.4% for the week. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had increased by 4 million barrels in the week ended January 15, and that gasoline supplies had risen by 4.6 million barrels.

U.S. gasoline stockpiles have risen by nearly 24 million barrels over the past three reporting periods. The inventory increases were announced Thursday and the price of WTI almost immediately began rising, and it soared even higher on Friday. The impetus appears to be a belief that the European Union and the European Central Bank will soon announce additional economic stimulus which, in turn, will raise demand for all sorts of goods, including energy.

The number of rigs drilling for oil in the United States is down by 807 year over year and down by five week over week. The natural gas rig count dropped by eight, from 135 to 127. The count for natural gas rigs is down by 189 year over year. Natural gas closed the week at $2.14 per million BTUs, up one cent from $2.12 at the end of the prior week.

U.S. refineries ran at 90.6% of capacity, a week-over-week decrease of about 223,000 barrels a day. Imports fell to 7.8 million barrels a day in the week, a week-over-week decline of 409,000 barrels a day.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — dropped 29,454 short contracts last week and 9,163 long contracts. The movement reflects changes as of the January 19 settlement date. Managed money holds 240,700 long positions compared with 184,037 short positions. Open interest totaled 1,686,382. There were 66 hedge funds with large short positions last week, an increase of six compared with the prior week.

Among the producers themselves short positions outnumber longs, 398,711 to 168,623. The number of short positions rose by 2,676 contracts last week and longs fell by 2,427 positions. Positions among swaps dealers show 193,648 shorts versus 232,689 longs. Swaps dealers dropped 10,047 contracts from their short positions last week and 17,751 long contracts.

Among the states, Texas dropped seven rigs again last week, Pennsylvania dropped three and Kansas, New Mexico and North Dakota lost two each. California lost one rig. Alaska added two rigs and Ohio added one.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count fell by three to a total of 199. The Eagle Ford Basin in south Texas lost four rigs, bringing its total to 64. The Williston Basin (Bakken) in North Dakota and Montana now has 45 working rigs, down two from the prior week.

Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $25.98 per barrel for WTI and a January 23 price of $20.46 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $25.93. The price for all three varieties of crude rose by 11 cents a barrel in the past week.

The pump price of gasoline fell by about 3.8% week over week. Saturday morning’s average price in the United States was $1.837 a gallon, down from $1.910 a week ago.