Oil ETFs Smacked as Crude Drops 3.6% on Higher U.S. Rig Counts

From OilPrice.com: Oil prices plunged by more than 3% today, erasing yesterday’s gains and pulling down oil-focused ETFs, as higher oil and gas rig counts pointed to a continued production glut.

The number of active oil and gas rigs in the United States increased by eleven sites this past week, which marked the eleventh straight week of no-decline in the oil rig count, according to Baker Hughes latest report.

Seven of the reactivated rigs counted towards the oil count, and the four others counted towards the gas count.

Last week, the oil rig count stood at its highest in seven months, even as the count hadincreased by just a single rig to 407.

The domestic oil rig count now stands at 414; this time last year, 652 oil rigs were active. The depleted gas count tells the same story; currently 92 gas rigs are in production, which is less than half of the amount of gas rigs active at the same time last year.

State-wise, Louisiana gained eight rigs and Texas restarted production at four sites. Utah, West Virginia and Ohio each gained one or two rigs each. Oklahoma lost four rigs and New Mexico lost two.

The Permian Basin, the largest basin by rig count, lost two rigs, while Eagle Ford’s count remained stagnant. The Utica and Marcellus formations increased by one or two rigs each.

Canada saw a three-rig decline in Friday’s report, after seeing a 25-rig jump two weeks ago.

Brent barrel prices stood at $48.26 at the time of the report’s writing, and West Texas Intermediate traded at $46.10—a fall from Thursday’s price spike after EIA inventory datarevealed what was the largest crude inventory draw this century. After yesterday’s release of the EIA report, West Texas Intermediate traded at $47.31 a barrel while Brent traded at $49.81.

The United States Oil Fund LP ETF (NYSE:USO) fell $0.35 (-3.19%) to $10.61 per share in Friday afternoon trading. The largest ETF tied to the price of WTI crude oil has now fallen about 3.5% since the start of 2016.


On the leveraged side of things, the VelocityShares 3X Long Crude ETN (NYSE:UWTI) plunged $2.39 (-9.54%) to $22.65 per share, hitting fresh all-time lows. The triple-leveraged oil ETF has now fallen 42% year-to-date, and 99.55% since its introduction in February 2012. With the share price under such heavy pressure, don’t be surprised to see another 1:10 reverse split announced for this fund soon.


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