The total number of operating rigs in the US the week ending July 5^th was 956, 733 oil and 184 gas. Month on month (m/m), oil rigs were up 3.1% and gas rigs were up 1.1%, for an overall increase of 2.6%. On a year on year (y/y) comparison, rigs have more than doubled, up 122% for oil and 107% for gas. The combined figure was +118%.

Figure 1 shows the Baker Hughes US Rotary Rig Counts for oil and gas equipment in the US from 1987 through July 5^th. The low point reached 404 on May 20, 2016. The trajectory has been on a steady increase since then, reaching 956 today. The last time the rig count was >956 was April 10, 2015.

Crude oil fell sharply, snapping the longest winning streak this year, as Russia objected to OPEDs proposal to deepen production cuts. Futures dropped as much as 3.9 percent in New York after eight straight sessions of gains. According to government officials. Russia doesn’t want to make any further supply restrictions because it would send the “wrong message” to the market. The U.S. dollar strengthened, reducing the appeal of commodities denominated in the currency. Energy markets reacted sending Brent crude down $1.60 per barrel, (3.2%) in intraday trading reaching $48.01 per barrel. West Texas Intermediate crude fell $1.69 per barrel (3.6%) in intraday trading hitting $45.38 per barrel. Natural gas also fell, reaching $2.86 per MMBtu, off 3.2% by mid-day July 5^th.

Table 1 shows rig count by state. The top nine states combined have 95% of the nation’s rigs. Texas dominates with 461, 49% of the current total, followed by Oklahoma with 132 for 14%. The next largest producing state was Louisiana with 67 rigs including all 21 offshore platforms. New Mexico had 60 rigs for 6% of the nation’s total. Rounding out the top five was North Dakota with 52 rigs accounting for 6%. As a point of reference rig totals topped-out in 2001 with 1,136 onshore and 177 offshore. Keep in mind that production per rig is far higher now. Output per rig continues to increase as the energy companies work to reduce cost and improve productivity.

Canada rigs topped189 for the week ending June 30^th, 112 oil and 77 gas. This was a huge increase of 120% for oil and 60% for gas on a m/m basis. On a y/y comparison oil rigs gained 220%, while gas rigs shot-up 93%.

At Gerdau we monitor rig counts along with the price of oil and natural gas since it has a major impact on long product sales to include Special Bar Quality sucker rods for down hole pumping strings to merchant and structural products for rigs and oilfield equipment.