What does the decline in active drilling rigs in the USA indicate?
The number of active oil rigs in the United States has maintained a downward trend since 2019. Recent data on the number of active drilling rigs from Baker Hughes in the United States showed a value of 684 units, a value corresponding to the level of April 13, 2017.
This turned out to be very positive data for the oil market, especially after the EIA data on the US oil inventories, which for the second consecutive week show crude oil reserves of 5.7 and 7.9 million barrels. The reason for optimism in the oil market is not only a decrease in active drilling rigs in the USA, but also the total number of drilling rigs in the USA from Baker Hughes (U.S. Baker Hughes Total Rig Count). Where the latter is markedly more rapid decline. This is due to the attenuation of the shale boom in the United States and limited liquidity for exploration and development of new deposits.
Separately, it is worth to highlight the dynamics of gas installations in the United States, which remained at the same level, as well as the reserved reserves of gasoline and distillates. This pushes the idea of maintaining the level of consumption, which could increase in seasonality.
Major oil brands reacted very restrained to data from the United States. Since the dynamics of oil prices are more dependent on the trade situation between the USA and China.
Brent oil brand chart
WTI Oil brand chart
Technically, both oil brands maintain the October uptrend, which as a result may be limited by the overall overbought and correction attempts from the Fibonacci correction level of 50%, from the high of September 16 to the low of October 3. For Brent, this level is – $ 63 per barrel, for WTI – $ 57 per barrel. This leads to the possibility of correction, which, in turn, will be limited to the lower boundary of the uptrend in October and November.