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Petroleum industry

Crude Futures Surge as US Rig Count Drops

Strategic Insights

— 2 min read

The sharp decline in US oil rig counts and a marked decrease in crude stockpiles have eased concerns over a glut in the market, leading to a nearly 5% surge in crude futures on Friday. The WTI crude for July delivery soared 2.62 to $60.30 a barrel, the first time it has ended a month above $60 since November. The move comes after OPEC's decision to keep production levels constant, which triggered a surplus of crude and led to a price crash. Industry experts have been closely monitoring the US rig counts, which have fallen at an alarming rate over the last six months, with the latest count dropping to 646, the lowest level since August 2010.

Key Takeaways:

  • The US rig count has dropped by 13 to 646, the lowest level since August 2010, with the number of oil rigs in the US decreasing at a rate of 1,954 since peaking above 1,600 last fall.
  • Crude futures surged nearly 5% on Friday, with WTI crude for July delivery soaring 2.62 or 4.54% to $60.30 a barrel, the first time it has ended a month above $60 since November.
  • Despite the surge, crude futures are still down more than 12% since November 27, when WTI crude plunged nearly $5 a barrel following OPEC's announcement to keep production levels constant.
  • US crude production increased to 9.566 million barrels per day last week, up from 9.262 million barrels per day for the week ending May 15.
  • Crude stockpiles have decreased markedly over the past several weeks, with the Energy Information Administration (EIA) reporting a 2.8 million barrel decrease in US crude stockpiles for the week that ended May 22.
  • Against expectations, crude stockpiles decreased by 2.8 million barrels, marking the fourth consecutive week of weekly declines.
  • The spread between international and US crude benchmarks rose to 5.23, up from 4.83 on Thursday, with energy traders awaiting a critical OPEC meeting next week in Vienna.

Statistics:

  • The US rig count has decreased by 1,954 since peaking above 1,600 last fall.
  • Crude futures surged 4.54% to $60.30 a barrel on Friday.
  • The US crude production increased to 9.566 million barrels per day last week.
  • Crude stockpiles decreased by 2.8 million barrels for the week that ended May 22.
  • The spread between international and US crude benchmarks rose to 5.23 on Friday.
  • WTI crude ended a month above $60 a barrel for the first time since November.

Sources:

  • "Baker Hughes Rig Count" (NYSE:BHI)
  • "Goldman Sachs Global Investment Research" (NYSE:GS)
  • "Energy Information Administration (EIA) Weekly Petroleum Status Report" (Thursday, May 28, 2020)
  • "Intercontinental Exchange (ICE)" (Friday, May 29, 2020)
  • "New York Mercantile Exchange (NYMEX)" (Friday, May 29, 2020)

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