Oil Drilling Rigs Fall Again, Smart Money Pares Positions

Oil Drilling Rigs Fall Again, Smart Money Pares Positions

$BHI, $USO, $UGA, $GS, $C

On the week ended 19 June, the number of working Crude Oil rigs drilling in the United States totaled 631, compared with 635 in the prior week and 1,545 a year ago.

Including 226 other rigs mostly drilling for Nat Gas, there are a total of 857 working rigs in the country, down 2 W-W and down 1,001 Y-Y. That according to the latest Baker Hughes Inc. (NYSE: BHI) North American Rotary Rig Count.

WTI Crude Oil for Jul delivery dropped to 59.69 bbl Friday. Analysts at both Goldman Sachs and Citigroup expect Saudi Arabia to increase production from the current level of around 10.3-M BPD to the Kingdom’s top at around 11-M BPD.

The position of global Crude Oil swing producer has fallen to the US tight (shale) Oil producers. The Saudis were in that spot since the 1980’s, but finally managed to pass it along last year when the Kingdom persuaded Organization of the Petroleum Exporting Countries (OPEC) to keep production up in order to maintain market share and not to worry about the price. By sticking to that plan, OPEC has forced US shale producers to stop drilling because the price of Crude Oil fell below a break-even mark

US crude stockpiles fell by 2.7-M bbl last week, the 7th consecutive weekly decline. Gasoline stockpiles rose slightly as refineries cut run levels to 93.1% of capacity, down about 294,000 BPD from the prior week. Gasoline inventories remain in the upper 50% of the 4-yr average range.

Hedge funds under the Managed Money heading in the Commodity Futures Trading Commission (CFTC) Commitments of Traders report cut their long positions last week by 893 contracts and also pared their short positions by 3,319. The movement reflects changes as of the 16 June settlement date. Managed money holds 297,492 long positions, compared with 58,448 short positions.

Among the producers themselves, short positions outnumber longs, 376,308 to 211,227. The number of short positions last week rose by 14,497 contracts and longs jumped by 15,058 positions. Positions among swaps dealers show 348,466 shorts and 182,661 longs. Swaps dealers cut 18,003 contracts from their long positions last week and dropped 11,690 short contracts.

Three states lost 2 rigs apiece last week: Louisiana, New Mexico and Oklahoma. Ohio and Wyoming each lost 1. The rest either gained 1 or remained unchanged, with the exception of Utah, which gained 2 rigs.

The posted price is 56.06 bbl for WTI (NYSEArca:USO) and a price of 51.61 a barrel for North Dakota Light Sweet, as well as a posted price of 55.86 a barrel for Eagle Ford Crude. All prices are about 0.35 bbll lower than they were a week ago.

The pump price of gasoline (NYSEArca:UGA)is down from last week.

Saturday morning’s average price in the United States was 2.795 a gal, down fractionally from 2.798 a week ago.

Have a terrific weekend.

HeffX-LTN

Paul Ebeling

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