US Oil Rig Count Ticks Down but Prices Jump on OPEC News

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In the week ending June 22, 2018, the number of land rigs drilling for oil in the United States totaled 862, one less than in the previous week and up by 104 compared with a total of 758 a year ago. Including 188 other land rigs drilling for natural gas and two listed as miscellaneous, there are a total of 1,052 working rigs in the country, down by seven for the week but 111 more year over year. The data come from the latest Baker Hughes North American Rotary Rig Count, released on Friday afternoon.

West Texas Intermediate (WTI) crude oil for July delivery settled at $66.89 a barrel on Thursday and traded down about 3% Friday afternoon at $64.91 shortly before regular trading closed. Brent crude for August delivery traded at $73.36 a barrel, down 3.4%.

The natural gas rig count fell by six to 188 this week. The count for natural gas rigs is now five more year over year. Natural gas for July delivery traded up about 1.6% at around $3.01 per million BTUs, up about 12 cents compared to last Friday.

Crude oil prices have gained nearly 4.6% Friday to trade at around $68.56 shortly before trading closes for the day. The August contract for WTI settled at $65.54 on Thursday and opened at $65.96 this morning.

The big mover for prices was the announcement from OPEC that its members and partners had agreed to increase production by 600,000 barrels. This sent prices higher because most traders and analysts were expecting a larger increase. Here are the salient paragraphs from the OPEC press release:

Recalling the 171st OPEC Conference resolution reached on 30 November 2016 for a production adjustment of 1.2 [million barrels per day].

Noting that OPEC Member Countries have exceeded the required level of conformity that had reached 152% in May 2018.

Accordingly, the Conference hereby decided that countries will strive to adhere to the overall conformity level of OPEC-12, down to 100%, as of 1 July 2018 for the remaining duration of the above mentioned resolution and for the JMMC to monitor and report back to the President of the Conference.

The loss of a single oil rig did not have much impact on the oil market today.

Among the states, Baker Hughes reports that Alaska added two rigs and Wyoming added one this week. Louisiana lost four rigs, Oklahoma lost two, and four states — Colorado, North Dakota, Pennsylvania and Texas — lost one rig each.

In the Permian Basin of west Texas and southeastern New Mexico, the rig count now stands at 472, two less compared with the previous week’s count. The Eagle Ford Basin in south Texas has 82 rigs in operation, unchanged week over week, and the Williston Basin (Bakken) in North Dakota and Montana now has 56 working rigs, down by one for the week.

Producers dropped two horizontal rigs this week and the count slipped to 930, while offshore drillers reported a total of 18, one less than last week’s count.