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Baker Hughes Rig Count Bounces Higher

November 17, 2017

Today’s weekly count of drill rig activity from Baker Hughes indicated a net increase of 8 rigs operating in the United States, an addition of 5 in Canada and a decrease of 20 operating internationally for the month of October over 2016’s figure.

Area                       Last Count                             Change
United States        November 17th                    +8
Canada                   November 17th                  +5
International             October                             +20

This caps off a cruel week for crude as both major benchmarks saw declines for much of the week – until popping higher just this morning.

While profit-taking on the part of hedge funds was the likely culprit for much of the pullback, reports from the American Petroleum Institute (API) and the International Energy Agency (IEA) hit at the very fundamentals of the crude complex. The API data indicated a much greater build in North American crude inventories than expected, while the IEA cut expectations about future demand growth. Both of these data releases unsettled traders – who had grown increasingly optimistic about the potential for a more balanced crude market in the wake of 2014’s massive selloff.

Earlier this morning, confidence in crude returned as traders digested comments from the Saudi energy minister, who signalled his support for an extension of OPEC’s supply cuts beyond the current March 2018 deadline. This had oil bulls stampeding out of the gate, driving both major crude indexes 2 percent higher.

Bottom Line: Despite this week’s disappointing data from the API and IEA, both oil drillers and traders are entering the weekend in a more hopeful mood – but this week’s uptick in drilling activity remains a cloud on the horizon, as it marks a break from the consistent declines in activity seen since mid-July. The current bout of optimism faces challenges ahead…