The Baker Hughes report shows a drop of 7 oil rigs, bringing the total to 415. Gas rigs went up by 5, reaching a total of 122. This means there was a net loss of 2 rigs, giving a combined total of 542. Crude oil is priced at $65.42, down by $0.61. During the trading week, oil tested its 100-day moving average, which now stands at $64.91.

Market Levels

The lowest price this week was $64.76 on Wednesday. However, the market couldn’t stay below the 100-day moving average. For the week, crude oil prices fell by $0.63, or 0.96%, compared to these market levels. The drop of seven oil rigs is a positive sign for crude oil prices. With only 415 active oil rigs, U.S. producers appear to be cautious, not aggressively increasing drilling even as prices are healthier. This careful approach suggests that production growth will be slow. Historically, the current number of rigs is very low. Before the pandemic in early 2020, the count was over 670. This shows drillers are hesitant to increase activity, despite better prices. This disciplined method should help balance supply and demand in the coming months.

Reduced Supply Implications

Recent government data backs up this view. The U.S. Energy Information Administration (EIA) recently reported a significant drop in commercial crude oil inventories, with stocks down by 7.9 million barrels. This larger-than-expected fall indicates that demand is outpacing supply, and a falling rig count will only speed this up. As Michalowski’s analysis suggests, the price found strong support at the 100-day moving average. Not breaking below $64.76 shows that buyers are stepping in during dips, creating a solid base for the market. This technical strength combined with fewer rigs presents a clear opportunity. Considering these factors, we suggest that derivative traders look into bullish positions. Buying out-of-the-money call options or using bull call spreads for the coming months would be a way to benefit from expected price rises. These strategies provide a low-risk way to profit if crude oil rallies off this support and tightens in supply. Create your live VT Markets account and start trading now.

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