Insights 
VT 
The number of active oil drilling rigs in the US declined for the ninth consecutive week, with a decrease of 6 this week, bringing the total to 432.
Natural gas rigs also saw a decrease, dropping by 2 to reach a total of 109.
Current Oil Prices
Currently, WTI crude oil is trading with a minor decline, down 11 cents, priced at $67.65.
The decline in US oil and natural gas rigs signals a steady contraction in upstream activity. With the oil rig count now at 432, it marks the longest consecutive string of weekly drops in over a year. Natural gas rigs, having also dipped to 109, mirror the broader retreat in exploration efforts. This prolonged reduction typically points to restrained supply growth in the months ahead, particularly if the trend continues.
Crude oil prices, though mostly steady, reflect a market in a cautious mood. WTI’s slight drop of 11 cents to $67.65 suggests that traders are weighing limited production growth against persistent demand uncertainties. While not a dramatic move, it highlights that sentiment in the futures market remains subdued.
Baker Hughes’ latest report underscores a confidence gap among producers. A string of poor margins, combined with weaker forward pricing, seem to be keeping operators on the sidelines. In this environment, the production outlook looks constrained moving deeper into the quarter.
Forward Market Expectations
While overall crude supply is not yet contracting at the wellhead, forward guidance from major shale groups implies a conservative stance. Fewer rigs today usually translates to lower output three to six months down the line. That has direct relevance for options pricing and calendar spreads, especially into the autumn settlement period.
In the forward curve, prompt month pressure continues to weigh on the front, where liquidity is deepest and hedging volumes are most concentrated. The lack of fresh positioning appears to reflect market uncertainty more than any clear directional conviction.
Helmerich & Payne’s recent earnings call hinted at subdued rig demand, confirming what we see in the data. Drillers remain disciplined. Investors are punishing excess, so it’s no surprise budgets are tight and equipment stays in the yard. Drilling costs have started to flatten, but they haven’t returned to pre-2022 levels, especially not with supply chain challenges still unresolved.
For spreads, this lowers the probability of sharply wider contangos for now. Flat price may trend quietly unless there’s a prompt demand shock. Calendar spreads from Q3 onward are showing only mild backwardation, and that may flatten further without a revival in drilling activity or an outright price driver on the demand side.
We saw gas rigs edge lower again. That’s been a dependable pattern lately. The LNG export growth story remains the main offset, but right now it doesn’t seem enough to spur fresh investment. Recent pipeline constraints in the Permian and Marcellus haven’t helped.
Powell’s press conference may have taken the edge off the dollar slightly, but inflation expectations remain soft. That’s not feeding much into the commodities space yet. Energy traders likely noticed the bond market’s reaction more than crude’s on the day. Thin volumes are adding noise to intraday moves, as bets unwind quickly on small headlines.
The volatility surface on oil has been surprisingly flat, especially given geopolitical risk hasn’t disappeared. Implied vol remains pinned near its six-month average, suggesting that even options desks are refraining from large speculative books. This environment favours delta-neutral strategies, though they require more patience.
The next few weeks offer one thing: reduced clarity. Positioning has grown lighter as tail risk sells off. Yet that also creates opportunity. The more disconnected price action becomes from physical signals like rig counts, the more opportunities there are for sharp correction trades.
We’re watching basis differentials closely, especially around the Gulf Coast. Refinery margins have narrowed lately. If rig declines finally begin to impact actual crude throughput, differentials could widen quickly. WTI-Midland and WTI-Houston spreads are where that would first show up. Keep an eye there before the end of the month settlement.
In summary, the reduction in rig activity is not just a statistical trend—it is a reflection of sentiment, cost discipline, and margin pressure. Each of these elements provides an input into forward returns for those who read between the lines.
