seanteohDepressed Crude Oil Prices Keep the Oil Rig Count Down WTI crude oil price and rig counts Although the current rig count indicates a production lag, it’s important to keep in mind that the number of active oil rigs loosely follows prices. Oil producers tend to only increase the number of active rigs if crude oil prices make production profitable. When prices increase, rig additions may accelerate. When prices fall, rig additions may slow down. For the number of oil rigs to fall or show a clear downward trend, crude oil prices need to fall to levels that make drilling unprofitable. Although this kind of fall rarely happens, it does occur, as we saw following the 2008 financial crisis.
seanteohYellen in SF, oil trade gets messy & biotechs hit a bump: What to watch The sudden bump higher in crude-oil prices (CLK15.NYM) in response to air strikes in Yemen and generally growing strike in the Middle East gave only the mildest lift yesterday to energy stocks. This is partly because the sector had outperformed nicely the day before in a weak tape. But it also suggests that stock investors surveying this sector refuse to extrapolate a geopolitically driven price hike as a real recovery trend for oil. The Market Vectors Oil Services ETF (OIH) is just about the rawest nerve in the stock market when it comes to responding to signals about crude oil prospects. It has lost a third of its value over six months, but zooming in more recently it has stabilized. The oil-services trade remains a messy one. Everyone well knows the abundance of oil hunting for storage, the soft demand picture in the emerging world, the fragile finances of many leveraged North American producers, the steady stream of secondary stock offerings from cash-strapped energy companies and the headwind of a stronger dollar. And yet the stocks are trying to find their footing. They’ve incorrectly front-run a sustainable recovery in crude prices before in recent months. At some point they’ll probably get it right.