One reason gasoline prices will go back up in 2016
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Baker Hughes is showing another 43 oil rigs taken out of production which means it now has passed the “500 Mark” of rigs out of production. The total count of rigs out of production compared to this time last year now stands at 502.
Newly released data from Baker Hughes Inc. shows another 48 oil/natural gas rigs taken out of production. The count now stands at 1,310 still active. Down 461 rigs from this time last year.
Oil rig production continues its plunge and gas prices are starting to show that. Here is the latest data on oil rigs:
The number of active U.S. land rigs plunged by 98 this week in one of the biggest declines in the past three decades as fallen oil prices continued to pummel the industry’s drilling ambitions.
Baker Hughes’ 71-year-old U.S. rig count, one of the industry’s go-to indicators of future oil production and demand for rigs, was down by 406 drilling units compared to Feb. 13, 2014. The last time the rig count fell by 98 was in January, 2009 – the two declines are tied for the biggest drops since 1987.
H/T Fuel Fix
Gasoline prices are slowly rising which is correlating with oil rig production. Baker Hughes Inc. released data showing ninety four more oil rigs taken out of production.
RenewEconomy.com had this write up about the production of oil being shut off:
In just three months, the rig count has fallen by 24 per cent, or 389 from the all-time high of 1,609 recorded for the week of 10 October last year. As Mark Lewis, from Paris-based analysts Kepler Chevreux notes: “In all of the historical Baker Hughes data stretching back to July, 1987, there is no precedent for a drop of this speed or severity.”
In December I posted a blog about why gas prices will go back up and it received numerous hits. The content of that post is now playing out. Mark J. Perry just released some data of oil rigs being shutdown due to the drop in price of crude oil. Here is what he found:
US Oil Rigs Fell Last Week to 1,317, Down 292 and 18% from October Peak of 1,609
This is a quick reversal so I wouldn’t be surprised if 500 shutdowns happen before March. With production falling and the strength of the dollar in question, crude oil will eventually start rising.
As crude oil prices have collapsed over the last few months oil producers have taken notice here in the US. Once oil prices reach a certain point, oil rig operators start shutting down rigs because it cost more to run them then what it’s worth in pumping oil.
Oil tycoon Boone Pickens is a guy you want to follow on predictions in the oil market and he just came out with one reason why oil prices will likely go back up in 2015. Robert Wenzel from Economic Policy Journal pointed to this interview for reference:
Boone Pickens was on CNBC this morning and he noted that some 75 rigs have been laid down, out of a total of around 1,500 rigs operating in the US. He expects that another 500 rigs will be taken out of operation over the next few months.
This is a big swing in oil production and something that needs to be monitored along with the strength of the dollar.