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Today’s weekly count of drill rig activity from Baker Hughes saw a net increase of six rigs operating in United States and seven in Canada, with a change of 20 over the month prior for rigs operating internationally.

Rig Numbers & Change From Prior
United States         929      +8
Canada                    222      +7
International         951       +20

This release marks the third consecutive week of net gains to drilling activity, calling into question the future trajectory of North American oil supply. However, it’s been completely overshadowed by news of last night’s OPEC agreement.

The agreement between OPEC members and their partner Russia proved much more robust than expected. While existing cuts were to expire March 2018, the new agreement extends those 1.8M barrel a day cuts till the end of 2018. That’s far beyond the mid-2018 timeline in which many forecasters believed the crude market will come into balance.

The market impact has been absolutely euphoric, with both WTI and Brent posting 2% gains in today’s trading. The entire crude complex has capped off a multi-month period of consistently higher prices.

Bottom Line: For now it seems that oil bulls are safe to run. That said, it’s important to remember that all asset classes are cyclical, and this is especially true of commodities. Today’s gains can easily precipitate tomorrow’s pain.

Sean Coakley, CFA

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