The weekly Baker-Hughes North American Rig Count is out: operational rigs are down to 664 from 667. The net decrease of three oil rigs has essentially given back the gains reported last Friday. Today’s figure is a bit of a surprise ― prices are above $60.00, U.S. stocks are up, and inventories are down. Aren’t North American producers excited about what 2020 may bring? At least for now, drillers in the U.S. and Canada are proceeding with caution.

Of course, the weather plays a key role in the rig count. Currently, we are heading into the North American winter months, which traditionally means a lull in production. However, WTI pricing is strong and appears poised to challenge 2019’s yearly highs ahead of 1 January. With two key resistance levels on the horizon, it will be fascinating to observe the late-year WTI trade.

Rig Count Falls Modestly, WTI Follows Suit

Going into the weekend break, February WTI crude oil futures are giving back some of this week’s gains. Prices are down a little over 1%, but are holding in short-term bullish territory.

We are near the end of the year, so it’s time for some perspective. WTI prices have rotated between $60.00 and $52.50 for a majority of the past 12 months. The bearish trend of late 2018 is hanging on by a thread, with the 62% Retracement ($62.05) having yet been shattered. For now, we are looking at the results of a bullish fall season, nothing more.

Bottom Line: In a Live Market Update from Wednesday, I outlined a rollover trading plan for January WTI. The play never developed, but was very close to doing so. With all eyes on the February WTI contract, there is a great chance we will see a test of 2019’s high in the next week.

Until elected, I will have sell orders in February WTI from the 62% Retracement at $61.99. With an initial stop above 2019’s high at $64.06, this trade yields 207 ticks on a 1:1 risk vs reward ratio.

Be forewarned ― this is a position trade that is quite expensive to execute properly on the futures market. Cutting the leverage down via a USOIL CFD is a much cheaper way to play the action. With a bit of luck, we will get the opportunity to do so ahead of the next Baker-Hughes Rig Count.