Energy
Oil Rig Count Drops by 11, Hedge Funds Still Exiting Short Positions
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In the week ended April 29, the number of rigs drilling for oil in the United States totaled 332, compared with 343 in the prior week and 679 a year ago. Including 87 other rigs drilling for natural gas, there are a total of 420 working rigs in the country, down 11 week over week and down 485 year over year. There is one new rig listed as “miscellaneous.” 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 June delivery traded down less than 0.1% on Friday to settle at $45.99. The June contract rose about 5% in the week and was up 20% in the month of April. The U.S. Energy Information Administration (EIA) reported last Wednesday that crude supplies had increased by 2 million barrels in the week ended April 22 and that gasoline supplies had increased by 1.6 million barrels.
Crude oil made a solid comeback in April, reaching prices last seen in November of last year. While it is tempting to assign all (or at least most) of the increase to speculation in the oil markets, the situation is more complicated than that.
Production cuts, primarily in the United States, have begun to have an effect on the supply and demand balance. Consumption is rising even as production is falling. Thanks to low pump prices, people are driving more and buying new sport utility vehicles (SUVs), crossovers and pickups that are less fuel-efficient than most cars.
Global demand is expected to rise by 1.2 million barrels a day in 2016, on top of demand growth of 1.8 million barrels a day last year. Supplies are forecast to fall by 700,000 barrels a day, mostly in the second half of the year.
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