There was good and bad news for those oil bulls (and inversely, bears) in today just released Baker Hughes rig count.
The good news - for the bulls - is that the rig collapse continues, with "only" 1,069 rigs currently operating, down 5.0% from last week's 1,125, and the lowest since March 2011. The hope (because lately that's all there is) is that since oil rigs are plunging at an annual pace last seen 1986, that sooner or later production will be mothballed. However, as the blue line in the chart below shows, quite the contrary is happening as plummeting oil rigs simply means even more record production.
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As for the good news for the bears, the latest weekly drop of 56 indicated the first slow down in the weekly decline, following last week's 67. If this is the start of a trend, it may well mean that drillers are taking full advantage of gullible BTFD equity and bond investors, and are throwing all they can at the oversupply problem by... supplying even more oil.
If indeed the weekly drop in the rig count next week slows down dramatically, watch out as Cushing overflows, and oil starts to be liquidated en masse as the US runs out of storage capacity in just about 2 months.
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And as a parting reminder, here is Bloomberg to explain the 'link' between wells, production, and rigs:
