A Reuters survey also indicates that OPEC production declined modestly in the month of October. Crude oil prices are on pace to finish the week higher after two straight weeks of declines.
This weeks Baker Hughes U.S. oil rig count came in at its lowest level since June of 2010, falling by 16 to 578. WTI crude prices are up slightly following the release of the numbers.
Decline Gaining Momentum
The 16-rig weekly decline was the largest drop in four weeks and further indication that the trend in oil rig count remains downward for now.
The combined oil and gas rig count declined by 12 during the week to 775, its lowest level since April 2002.
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More Good News For Oil Longs
The falling rig count is good news on a positive Friday for oil bulls. Earlier in the day, a Reuters survey found that OPEC oil production declined month-over-month (M/M) in October.
The modest decline, from 31.76 million bpd in September to 31.64 million bpd in October, was reportedly not intentional on the part of OPEC and was mostly the result of production declines in Saudi Arabia and Iraq in October.
In the face of a global oil supply glut that has sent crude prices plummeting to multi-year lows, OPEC production remains 1.5 million bpd above its November 2014 level.
Despite plummeting U.S. rig counts, OPECs refusal to significantly rein-in production means the short- to medium-term outlook for oil prices continues to be bleak. This strategy on the part of OPEC is likely a deliberate attempt to regain lost global market share from producers with higher production costs.
OPECs is hoping that its game-plan will ultimately result in higher oil prices in the future. In the end, OPECs strategy is creating the conditions for higher prices for longer in a couple of years, BNP Paribas analyst Harry Tchilinguirian explained.
After two straight weeks of declines, the United States Oil Fund LP (ETF) (NYSE:USO) is on track to finish this week up more than 4.0 percent.
Disclosure: The author holds no position in the stocks mentioned.
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