Oil Rig Count: Early Look at the Damage

Bottoms are in fact processes, and a combination of project delays, cap-ex cuts (25% in the E&P sector), and drilling stoppages are moving to provide INCREMENTAL support to oil prices. In any time series we contextualize each new data point on the margin (acceleration or deceleration in the current trend.)


The marginal changes in the table below are very clear with regards to the production outlook for U.S. producers. Of note is that we are showing crude oil production because of the 135 rigs that have come off in the last two weeks, only 19 of those were purely gas-based. The regional data is released monthly while the aggregate data through today is represented in red.

  • Crude oil production in the U.S. is increasing at a DECELERATING rate
  • Production per rig has been in an upward TREND since 2011, mainly because of technological advances, but the delta-positive TREND is now DECELERATING
  • In aggregate the Baker Hughes Rig Count in the United States is decreasing at an ACCELERATING rate with the two largest oil-producing plays already following this trend through the December data release of the EIA’s Drilling Productivity Report 

Oil Rig Count: Early Look at the Damage  - Chart1 Rig Count


History often rhymes, and we have once again confronted the reality that in a capital intensive world, supply/demand imbalances are not corrected overnight.


While the world was much different in 2008, E&P companies are very sensitive to oil prices under any circumstance. WTI declined 77% from July 3rd , 2008 to December 19th 2008. The oil rig count topped almost exactly 4-months after the July highs on November 7th , 2008 before being cut in half by June of 2009 (6-months after oil bottomed in December).

We haven’t seen quite the rout in WTI, but we expect the TREND of rigs coming offline to continue at least through the first quarter.

While the macro process is signaling the pressure on crude oil remains, we want to call out our incremental absorbtion of an important data point that has remained a central theme in our macro view since moving into QUAD#4. Communicating the process is everything. 


WTI is testing the top end of our Immediate-term TRADE range within a BEARISH TREND/TAIL set-up. A model that contextualizes macro across durations provides a check from reversing our process with each new piece of information. Relying on human nature alone to make consistent, clear decisions gets hairy.


Oil Rig Count: Early Look at the Damage  - chart2 levels chart


Ben Ryan


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more