MARKET WATCH

Oil finishes higher as U.S. rig count drops to 5-year low


Published: Oct 2, 2015 3:04 p.m. ET / By Myra P. Saefong and Eric Yep


Oil futures finished higher on Friday, buoyed by data showing a weekly drop in the number of
active U.S. drilling rigs to their lowest level in more than 5 years.


Prices had been trading lower before the rig data from Baker Hughes Inc. BHI, -3.99% Earlier, a
slowdown in U.S. job creation last month hinted at the potential for weaker energy demand,
pushing oil lower.


November West Texas Intermediate crude CLX5, +0.06% settled at $45.54 a barrel, up 80 cents,
or 1.8%, on the New York Mercantile Exchange after earlier hitting lows under $44. For the
week, the contract was still down around 0.4%.


November Brent crude LCOX5, -0.92% on London’s ICE Futures exchange tacked on 44 cents,
or 0.9%, to $48.13 a barrel, but saw a weekly loss of about 1%.


Baker Hughes said Friday that the active oil-rig count fell by 26 to 614 as of Friday. The total
active rig count, which includes natural gas, fell 29 rigs to 809.


“This is a big drop,” said James Williams, energy economist at WTRG Economics.


“This is the lowest overall rig count since May 2002 and is definitely bullish,” he said. “With
bankers re-determining credit limits at the end of the quarter, this is an indicator of limited
capital for drilling this quarter.”


Reports earlier Friday showed that the number of new U.S. jobs created in September slowed
sharply for the second straight month and U.S. factory orders dropped 1.7% in August.


“Oil markets have to be concerned that incremental demand growth could taper off, leaving the
trade with a flat demand signal going into mid-2016, instead of the demand growth,” said
Richard Hastings, macro strategist at Seaport Global Securities, before the rig-count data.
The jobs report had also triggered “a helpful decline in the U.S. dollar DXY, +0.11% ” which
provided support to oil prices, said Hastings. “Throw in the idea that a Fed funds hike is way off
into the future, and we could see additional declines in the [dollar].”


Oil prices settled lower in the previous session, largely on account of weaker U.S. and European
manufacturing data.


Some analysts have said that Hurricane Joaquin has the potential to disrupt oil refinery activity
on the East Coast, which could contributed to higher crude supplies and lower prices. But the
National Hurricane Center said Friday that the threat of a direct hit to the East Coast is easing.
Read: Here’s how Hurricane Joaquin could end up sinking oil prices.


Late Thursday, Platts reported that China’s apparent oil demand rose 10.2% to average 11.19
million barrels a day in August compared with a year earlier.


On Nymex, November gasoline RBX5, +0.79% shed 2.5 cents, or 1.9%, to $1.341 a gallon, with
the contract down about 2.8% for the week, while November heating oil HOX5, -0.48% was
nearly flat at $1.52 a gallon, for a weekly loss of 1.7%.


November natural gas NGX15, -1.26% settled up 1.8 cents, or 0.7%, at $2.451 per million
British thermal units, ending around 6.8% lower on the week.


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