Baker Hughes reported that the number of oil rigs dropped by five, bringing the total down to 410. Meanwhile, gas rigs went up by two, reaching a total of 124. Overall, there has been a decrease of two rigs, making the combined count 540. Crude oil prices fell sharply, losing two dollars to settle at $67.27. The lowest price of the day was $67.05. The hourly chart indicates that prices are testing the 200-hour moving average at $67.08. Earlier, prices dipped below the 100-hour moving average of $68.60.

Decrease in Oil Rigs

The decline in oil rigs to 410 indicates that U.S. companies are cutting back on future drilling and production. This drop, alongside falling oil prices to $67.27, shows a strong negative sentiment. It seems to reflect concerns about lower demand in the future. Earlier this year, U.S. rig counts were closer to 490, making today’s number a significant drop in activity. The current oil price is also nearing the break-even point for many shale producers, which might lead to more drilling cuts. This trend ties in with the weaker economic forecasts emerging lately. For traders, this weakness suggests buying put options to take advantage of potential further price declines. With prices falling below key moving averages, targeting strike prices around $65 or even $62 for contracts expiring in September is a reasonable strategy. This approach allows for leveraging current negative momentum. Another strategy could be using credit spreads, like selling a bear call spread. This allows for profit if oil prices stay below a certain level, such as $70, over the next few weeks. This strategy also benefits from the high volatility that often comes with sudden price drops.

Impact of Global Forecasts

This price drop coincides with updated World Bank forecasts from earlier this year, which indicated a slowdown in global industrial activity for the second half of 2025. We also saw disappointing manufacturing data from China last month, raising concerns about demand from the world’s largest oil importer. These fundamental issues support the technical breakdown we’re seeing. However, we should keep an eye on any statements from OPEC+ in the coming weeks. Historically, when prices stay below $70 for an extended time, the group has considered production cuts, as seen in 2023 and 2024 to stabilize the market. A sudden announcement could quickly change the current downtrend. The price crossing below its 200-hour moving average is a key technical signal that day traders are noticing. The next significant support level to watch is the psychological $65 mark. A decisive move below this level could trigger more selling as automated trading and stop-loss orders come into play. Create your live VT Markets account and start trading now.

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