Baker-Hughes Reports Drop In U.S. Rigs

Once again, it is Friday and the end of the trading week is near. One of the key performers over the past five sessions has been December WTI crude oil. Prices are on the rise, in spite of fall seasonality. OPEC production cuts and a surprise draw on supplies has prompted a bullish bump north of $55.00. Now, today’s Baker-Hughes North American Rig Count has given energy traders even more food for thought.

A little over an hour ago, the Baker-Hughes Rig Count hit the newswires. The number came as a shock to many, dropping by 17 oil drill rigs from last Friday. Baker-Hughes reported a total of 696 operational North American oil rigs, down from 713 last week. Although it is typical for production to drop off going in the winter months, today’s decrease in oil-specific rigs is one of the largest in recent memory.

The news certainly hasn’t hurt WTI crude oil, which is holding firm above $56.00.

December WTI Hangs On Following Baker-Hughes

It has been a tight session for WTI crude oil futures. The action has been relatively tame, and at press time (2:15 PM EST), prices are hovering near flat. To gain perspective on today’s action, check out monthly December WTI crude oil chart below.

Baker-hughes
December WTI Crude Oil Futures (CL), Monthly Chart

Overview: Perhaps the most striking observation from the WTI monthly chart is that we continue to trade inside of 2018’s range. Prices put in a spring 2019 rally before failing at the 62% retracement and turning south. Moving forward, one has to respect the downside potential of this market as 2019’s action could not be sustained above the $65.00 handle.

A second point the chart makes is that $55.00 has been traded for six consecutive months. It is a major value area and a battleground for long-term bulls and bears. If and when WTI moves directionally, the origin will very likely be $55.00.

Next week marks the final trading week of October. With November coming on next Friday, WTI will be poised to begin its late-year journey north or south. Given the long-term technical outlook and shrinking Baker-Hughes Rig Count, one has to think that a significant selloff is just around the bend.

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ABOUT THE AUTHOR See More
Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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