This article has been corrected.
Oil prices have been crazy these past few weeks.
That’s after spending months in a practical free-fall.
It’s hard to say whether or not this is the bottom, but one chart everyone’s pointing to is the Baker Hughes $BKR tally of oil rigs looking for oil in the US. It fell off a cliff last week, the fastest dip on record.
Does that mean production has taken a hit? Not yet.
And for good reason. Michael Shaoul of Marketfield Asset Managementwrote in a note to clients: “The production of rigs is not linear, with approximately 80% of the nations production coming from approximately 20% of the wells, and therefore the sharp drop in active rigs will not be a measure of actual production being taken off line.”
So far, the oil slide is killing off the weaker rigs.
The next rig count comes out Friday at 1 p.m. eastern time in the US. With oil companies announcing spending cuts left and right, any hint that further rig culling might portend even a little less supply could ease traders’ minds as they feel out the market’s bottom.
*Correction: A previous version of this article said that oil rigs pump oil. They are used to drill for oil.
