- The widely watched Baker Hughes oil rigs report showed on Friday that the number of active rigs drilling oil fell worldwide fell to 1,514 in April, almost 30% lower than the same point a year ago.
- In the US, the rig count fell 44% year-on-year, dropping to 566 in April 2020.
- After crashing into negative territory last week, oil prices have rebounded after signs that demand may increase in the coming weeks as the global economy begins to reopen after widespread coronavirus lockdowns.
- West Texas Intermediate is currently trading around $US20 a barrel.
- Track the price of oil live with Markets Insider.
Released Friday, the report showed the number of active rigs at the end of April globally was 1,514, compared to 2,140 at the same point last year.
On a monthly basis rigs dropped about 23% from the 1,964 active at the end of March.
The number of active rigs in the US dropped even more severely, falling 44% compared to April last year.
There were 566 rigs active in the US in April, compared to 1012 at the same time last year, and 772 at the end of March, a fall of 27%.
A lack of economic activity coupled with growing storage surpluses has pushed oil prices down in recent weeks, meaning fewer rigs operate as drilling is less profitable. Lower rig counts usually spook traders, as it tends to signal problems with demand for oil.
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Coronavirus has shattered demand for the fuel and made oil prices plunge to historical lows in recent days, despite a recent deal by the OPEC and its members to reduce supply by almost 10 million barrels from May.
Lack of storage options, particularly at a key storage facility in Cushing, Oklahoma, and the reduction in demand for the commodity during the ongoing coronavirus pandemic, have both contributed to WTI’s historic price crash.
Demand for oil storage is growing slower than expected
However, prices have recovered since on signs that demand for storage of oil is coming off recent highs. A report from the US Energy Information Administration on Wednesday showed inventories of oil rising by nine million barrels last week, significantly lower than the 10.6 million barrel increase forecast by analysts.
Many large economies are moving to lift the most stringent of coronavirus lockdown measures. Several US states are taking measures such as reopening non-essential stores, while some European countries are taking similar steps. This reopening has boosted sentiment, creating expectations that oil demand will likely increase in coming weeks.
Traders are likely to closely monitor May’s oil rig counts when demand for oil is expected to have improved.
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