Oil Rig Count Slips by 6; Hedge Funds Slice Short Positions

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In the week ended November 6, the number of rigs drilling for oil in the United States totaled 572, compared with 578 in the prior week and 1,568 a year ago. Including 199 other rigs drilling for natural gas there are a total of 771 working rigs in the country, down from 775 week over week and 1,154 year over year. The data come from the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count.

Benchmark West Texas Intermediate (WTI) crude oil for December delivery fell by about $1.50 a barrel over the past five days to close the week down by about 4.9% at $44.52, after rising above $48 on Tuesday. Brent crude closed at $48.42 on Friday.

Friday’s report on nonfarm payrolls put a charge into the dollar, and when the dollar rises the price of crude typically falls. That is what happened this past week, although another addition to the U.S. crude inventory also played a role.

The jobs report also has some longer term implications for the price of oil. While it may be premature to declare that U.S. job creation is back on track after slipping in the months of August and September, there appears to be a better than even chance that the FOMC will boost the fed funds rate at its December meeting. That will add more strength to the dollar and increase the pressure on crude oil prices.

The number of rigs drilling for oil in the United States is down by 996 year over year and down by six week over week. The natural gas rig count rose by two, from 197 to 199. The count for natural gas rigs is down by 157 year over year.

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Gasoline stockpiles decreased by 3.3 million barrels last week and U.S. refineries ran at 88.7% of capacity, a week-over-week increase of 21,000 barrels a day. Refiners have increased throughput for three consecutive weeks now as fall maintenance and turnarounds draw to a close.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) weekly Commitments of Traders report — shed 18,020 short contracts last week and added 8,526 long contracts. The movement reflects changes as of the November 3 settlement date. Managed money holds 281,962 long positions compared with 116,244 short positions. Open interest increased by just 864 contracts to 1,676,897 week over week. The number of hedge funds with large short positions fell from 58 to 52 last week, as the hedgies changed direction.

Among the producers themselves, short positions outnumber longs 374,723 to 161,348. The number of short positions last week rose by 566 contracts, and longs fell by 16,846 positions. Positions among swaps dealers show 267,669 shorts versus 236,672 longs. Swaps dealers cut 5,028 contracts from their short positions last week and added 9,595 long contracts.

Among the states, New Mexico dropped five rigs last week, and California and Wyoming dropped two each. Louisiana and Oklahoma each lost one rig. Colorado added three rigs to its total, while Kansas, North Dakota and Texas each added one new rig.

In the Permian Basin of west Texas and southeastern New Mexico the rig count rose by three to a total of 232. The Eagle Ford Basin in south Texas lost three rigs to bring its count to 72, and the Williston Basin (Bakken) in North Dakota and Montana now has 64 working rigs, up by one compared with the prior week.

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Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $40.74 per barrel for WTI and an November 7 price of $37.08 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $40.69. The price for WTI and Eagle Ford crude fell by $2.30 a barrel in the past week, and the North Dakota Light Sweet price rose by $0.30 a barrel.

The pump price of gasoline increased week over week. Saturday morning’s average price in the United States was $2.221 a gallon, down nearly 2% from $2.179 a week ago.