The number of active oil and gas drilling rigs in the United States declined this week, according to the latest weekly survey from oilfield services company Baker Hughes.

The total rig count fell by five to 588. Crude oil-directed rigs dropped by three to 452, while natural gas rigs slipped by one to 127.

For the year, the comparable figures were 412 oil rigs, 122 natural gas rigs and 539 rigs in total. Even after this week's decline, the total count stands 49 rigs above its year-ago level, with oil-directed rigs up 40 and natural gas rigs up five over the same period.

Because rigs must be contracted, moved and put to work before any oil or gas flows, changes in the count tend to translate into production with a lag of months rather than days. A single week's move is also small relative to the overall count, which is why analysts generally read the series for sustained trends rather than one-week swings.

Price context

Crude oil is trading at $87, up $0.17 on the day. Over the trading week, the price has climbed $4.60.

On the daily chart, the intraday high reached $87.51, just below the 100-day moving average at $88.05. The high for the week was $87.69, set in the previous session. From a technical standpoint, moving and staying above the 100-day moving average would be viewed as a more bullish development.

Drilling plans are typically tied to the prices producers expect to realize, so the rig count is generally read alongside crude futures rather than in isolation, even though the relationship between prices and activity is not one-for-one.

About the survey

Baker Hughes has published its rotary rig count since 1944 and releases the data every Friday. The weekly count of rigs actively drilling for oil and natural gas is one of the most closely watched indicators of US upstream drilling activity, serving as a widely used barometer of exploration and production spending.

In recent years, longer horizontal laterals and faster drilling have allowed producers to sustain output with fewer rigs, so analysts also track measures such as drilled-but-uncompleted wells and per-rig productivity, published in the US Energy Information Administration's Drilling Productivity Report, for a fuller picture of supply. The next rig count is due on Friday, arriving in the same week as the EIA's weekly petroleum inventory data that market participants follow for signs of the supply-demand balance.

Source: investingLive