The weekly Baker Hughes rig count indicates slight changes in the numbers this week. The oil rig count has increased by one, bringing the total to 412. Meanwhile, the gas rig count decreased by one, now sitting at 122. The total rig count remains steady at 539.
In the oil market, crude oil prices have experienced a minor decline. The price is down by $0.72 or 1.13%, currently at $63.24. Over the past week, the price has seen little variation, closing last week at $63.33.
Current Market Signals
The stagnant rig count, with oil rigs barely adding one, shows that US producers are not willing to expand operations at a crude price near $63 per barrel. We see this lack of activity as a sign that the market is waiting for a stronger price signal before committing to new drilling. This indecision creates an environment of sideways price action for now.
Given the recent economic data, this caution makes sense. Manufacturing PMI data released for July 2025 showed a continued slowdown in both China and Europe, weighing on the outlook for fuel demand. The latest EIA report, which showed a smaller-than-expected crude inventory draw of just 1.2 million barrels last week, confirms that consumption is not strong enough to significantly move prices higher.
On the supply side, a floor seems to be in place around the low $60s. We know OPEC+ agreed in their June 2025 meeting to hold production cuts through the end of the year, which should prevent a major price collapse. The current low US rig count, down nearly 20% from the highs we saw in mid-2023, points toward flat or declining US output in the months ahead, further tightening future supply.
Potential Trading Strategies
For the next few weeks, this suggests a range-bound market, likely trapped between weak demand and constrained supply. Traders might consider strategies that profit from low volatility, such as selling iron condors with strikes centered around $60 and $68 on near-term options contracts. This approach bets that crude oil will not make a significant move in either direction.
However, such a tight balance is unlikely to hold for long. We could consider buying longer-dated straddles, which would profit from a large price move in either direction before the end of the year. The current low implied volatility makes these positions cheaper to enter, positioning for an eventual breakout when either the demand picture improves or the supply cuts begin to bite more deeply.
