Baker Hughes reported a decrease in oil rigs by five, bringing the current total to 410. In contrast, gas rigs increased by two, totalling 124. Overall, there was a reduction of two in the combined count of rigs, now standing at 540.
Crude oil prices experienced a sharp decline, dropping by two dollars to $67.27. The lowest recorded price for the day was $67.05. The hourly chart shows the price testing its 200-hour moving average at $67.08. Earlier in the day, the price fell below the 100-hour moving average, which was at $68.60.
Reduction In Oil Rigs
The drop in the oil rig count to 410 signals a clear reduction in future drilling and production plans by US companies. This decline, combined with oil prices falling sharply to $67.27, suggests a strong bearish sentiment is taking hold. We see this as a reaction to perceived weakness in upcoming demand.
Looking back, we know that US rig counts were hovering closer to 490 for much of 2024, making today’s number a significant contraction in activity. The current price is also testing break-even points for many shale producers, which could force further drilling cutbacks. This pattern is consistent with softening economic forecasts that have been emerging over the last few months.
For derivative traders, this weakness points toward buying put options to capitalize on potential further downside. Given the break below key moving averages, targeting strike prices like $65 or even $62 for contracts expiring in September seems like a reasonable strategy. This move would offer a leveraged bet on the current negative momentum continuing.
Another approach would be to use credit spreads, such as selling a bear call spread. This allows us to profit if the price of oil simply stays below a certain level, for example $70, through the next few weeks. This strategy also benefits from the elevated volatility that often accompanies sharp price drops.
Impact Of Global Forecasts
This price weakness aligns with updated forecasts from the World Bank earlier this year, which projected a slowdown in global industrial activity for the second half of 2025. We have also seen weaker than expected manufacturing data from China last month, fueling concerns about demand from the world’s largest oil importer. These fundamental factors support the technical breakdown we are witnessing.
However, we must watch for any statements from OPEC+ in the coming weeks. Prices falling below the $70 mark for a sustained period have historically prompted the group to consider further production cuts, as they did multiple times in 2023 and 2024 to support the market. A surprise announcement could quickly reverse the current downtrend.
The price slicing through its 200-hour moving average is a critical technical indicator that day traders have acted on. The next major support level we are watching is the psychological $65 mark. A decisive break below that level could trigger another wave of selling as automated trading programs and stop-loss orders are activated.
