Baker Hughes reported that the US oil rig count increased to 440, up from 433 in the previous reading. The data point tracks the number of rigs actively drilling for oil in the United States.
Producer Sentiment and Supply Implications
The rise in the US oil rig count to 440 indicates producer confidence in current price levels and future demand. We see this as a sign that more supply is being prepared for the market in the coming months. This fundamentally puts some long-term downward pressure on crude prices.
We must balance this with recent demand signals, as the latest EIA reports from this month showed an upward revision in global demand forecasts for the second half of 2026. Summer travel demand has been surprisingly robust, providing a strong near-term floor for prices around the $80-$85 WTI mark. This suggests that any price weakness from future supply is not an immediate concern.
Market Timing and Trading Strategy
Historically, rig counts are a slow-moving indicator, with a lag of several months before new production actually hits the market. The current count is still well below the nearly 700 rigs that were active back in late 2022, meaning this slow increase is not yet a threat of a supply glut. Therefore, we believe near-term price strength remains the dominant factor for the next few weeks.
Given this context, we are considering selling out-of-the-money call options for contracts with expiration dates in the fourth quarter of 2026. This strategy allows us to collect premium based on the belief that this future supply increase will eventually cap any major price rally later in the year. For the immediate weeks, however, we will maintain a cautiously bullish stance on front-month contracts.
