US: Baker-Hughes Rig Count

Fri Sep 08 12:00:00 CDT 2017

Actual Previous
N. Amer. Rig Count 1146 1144
U.S. 944 943
Gulf of Mexico 16 16
Canada 202 201

The Baker Hughes North American rig count is up 2 rigs in the September 8 week to 1,146, surprisingly posting the first increase in 6 weeks despite expectations of a decrease given an assumed but as of last week unverified and uncounted decline in the number of Texas rigs taken out of commission by Hurricane Harvey. But Texas rigs remain unchanged from last week in the Baker Hughes count at 455, while the overall U.S. rig count is up 1 rig on the week to 944, which is 436 rigs more than last year at this time. The Canadian count is up 1 rig to 202 and is up 68 rigs from last year.

For the U.S. count, rigs classified as drilling for oil are down 3 rigs at 756 while gas rigs are up 4 to 187. For the Canadian count, oil rigs remain unchanged at 102 and gas rigs are up 1 to 100.

The surprising increase in the count failed to confirm one of the assumptions lifting crude oil prices this week -
a decline in Texas exploration and development activity in the wake of Hurricane Harvey. WTI futures, already down more than a dollar on the day prior to the report, extended the day's losses by another 40 cents to around $47.72 per barrel in the minutes after its release.

The Baker Hughes North American rig count tracks weekly changes in the number of active operating oil & gas rigs. Used for drilling wellbores for wells that may eventually produce oil or gas, active rigs are essential for the exploration and development of oil and gas fields. Rigs that are not active are not counted. Components in the data are the United States and Canada with a separate count for the Gulf of Mexico (which is a subset of the U.S. total). The count includes only rigs that are significant users of oilfield services and supplies.

Changes in rig counts point to changes in the supply of oil & gas. The higher the rig count, the greater the upward pressure is on oil & gas supply and in turn the greater the downward pressure is on oil & gas prices. The reverse applies when rig counts turn lower, as they did during the oil price collapse of 2014-15 when lower counts contributed to a subsequent decline in domestic oil inventories. Data on the Gulf of Mexico offer indications on production disruptions during the hurricane season (June 1st to November 30th).