In the week ended January 6, 2017, the number of rigs drilling for oil in the United States totaled 529, up by four compared with the prior week and up 13 compared with a total of 516 a year ago. Including 135 other rigs drilling for natural gas and one rig listed as "miscellaneous," there are a total of 665 working rigs in the country, up by seven week over week and up by one year over year. The data come from the latest Baker Hughes North American Rotary Rig Count released on Friday.
Last week is the first week in more than a year when the year-over-year count was higher than it was a year ago.
West Texas Intermediate (WTI) crude oil for February delivery traded up about 0.4% on Friday to settle at $53.99. Crude prices increased by about 0.5% week over week. The U.S. Energy Information Administration (EIA) reported last Thursday that crude supplies had decreased by 7.4 million barrels in the week ended December 30, and that gasoline supplies had jumped by 8.3 million barrels.
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Over at S&P Global Platts, John Kingston has an interesting post about the changed relationship between WTI and gold prices. The historical ratio has been one ounce of gold to 15 barrels of oil. In 2016 the average ratio was 29.54 barrels of oil for one ounce of gold.
Kingston notes:
The 2016 average includes a period from the start of the year through early April when oil stayed steady around $35-$36 while gold surged from $1,080 per ounce to almost $1,220, boosting the ratio from 30.19 at the start of the year to 33.85. That included several days above 40, the first time in the history of our series we’ve seen that.
Why is this worth noting? A barrel of oil stores about as much energy as 6,000 cubic feet of natural gas, and for a long time the price of a barrel of oil was about six times the price of a thousand cubic feet of natural gas. In 2007 the ratio changed to nine to one, and a barrel of oil now costs an average of 17 times the price of a thousand cubic feet of natural gas.
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To return to a 15-to-one ratio, oil would have to rise to $77 a barrel to restore the historic relationship with gold priced at around $1,150 per ounce.
The natural gas rig count increased by three to a total of 135. The count for natural gas rigs is down by 13 year over year. Natural gas for February delivery closed the week at $3.26 per million BTUs, down 48 cents on the near-month contract compared with the prior week. The drop is almost entirely due to a forecast for warming temperatures beginning in mid-January.