Energy Economy

Oil Rig Count Slips by 10; Hedge Funds Boost Short Positions

In the week ended November 20, the number of rigs drilling for oil in the United States totaled 564, compared with 574 in the prior week and 1,574 a year ago. Including 193 other rigs drilling for natural gas, there are a total of 757 working rigs in the country, down from 767 week over week and down 1,172 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 January delivery fell by just a dime a barrel over the past five days to close the week at $41.90, after rising above $43 on Monday. Brent crude closed at $44.42 on Friday.

The price for a barrel of WTI for December delivery briefly dropped below $40 a barrel on Wednesday, Thursday and Friday last week as traders made the switch to trading January barrels. That the price soon bounced back is generally believed to indicate a $40 floor for crude.

Maybe. The posted price of the OPEC reference basket fell below $40 a barrel on Friday the 13th and the price never rose above $39 on any day last week. The basket’s price has not fallen below $40 a barrel for 11 years. The OPEC reference basket is typically priced at a discount to both Brent and WTI.

If OPEC is willing to let the price of its crude continue falling — as it says it is — prices for WTI and Brent could easily drop below $40 a barrel by the end of the year.

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The number of rigs drilling for oil in the United States is down by 1,010 year over year and down by 10 week over week. The natural gas rig count remained unchanged at 193. The count for natural gas rigs is down by 162 year over year.

Gasoline stockpiles increased by 1 million barrels last week, and U.S. refineries ran at 90.3% of capacity, a week-over-week increase of 137,000 barrels a day.

Hedge funds — under the Managed Money heading in the Commodity Futures Trading Commission’s (CFTC) weekly Commitments of Traders report — added 17,051 short contracts last week and dumped 11,588 long contracts. The movement reflects changes as of the November 17 settlement date. Managed money holds 266,187 long positions, compared with 159.229 short positions. Open interest decreased by 8,761 contracts to 1,662,829 week over week. The number of hedge funds with large short positions rose from 58 to 63 last week, as the hedgies changed direction (again).

Among the producers themselves, short positions outnumber longs 360,679 to 153,836. The number of short positions last week fell by 26,069 contracts and longs fell by 15,835 positions. Positions among swaps dealers show 263,763 shorts versus 233,785 longs. Swaps dealers added 4,760 contracts to their short positions last week and also added 3,777 long contracts.

Among the states, Louisiana and Oklahoma each lost four rigs and Wyoming and Colorado each lost three. West Virginia’s rig count fell by two and Ohio’s fell by one. Texas added four rigs, Pennsylvania added two and North Dakota added one.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count fell by four to a total of 225. The Eagle Ford Basin in south Texas added two rigs to bring its count to 75, and the Williston Basin (Bakken) in North Dakota and Montana now has 63 working rigs, unchanged from the prior week.

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Enterprise Products Partners L.P. (NYSE: EPD) lists a posted price of $36.84 per barrel for WTI and a November 21 price of $33.18 a barrel for North Dakota Light Sweet. The posted price for a barrel of Eagle Ford crude is $36.79. The price for all three grades of crude fell by $0.35 a barrel in the past week.

The pump price of gasoline decreased week over week. Saturday morning’s average price in the United States was $2.088 a gallon, down about 4% from $2.177 a week ago.