from Outsider Club:
It is still not time to invest in oil. That knife is still falling.
Consider the most recent Baker Hughes rig count, published this week. Another 30 rigs were taken offline in the previous week.
And the rig count has been falling like a stone for over a year now.
In late 2014 — as I was shouting from the top of my lungs that we were in a shale bubble — the U.S. rig count stood at 1,609 rigs.
Today, that stands at just 467 rigs, a reduction of more than 70%.
But that’s still not enough to bring equilibrium to the oil market.
As I told you earlier this week, Iraq is pumping at a record. Saudi Arabia has opened up the spigots. Iran is pumping oil into the world market for the first time in four years.
And they won’t stop until American shale fields are littered with corporate corpses. There have only been ~50 bankruptcies so far. We can start the bottom talk when that number climbs to the hundreds.
Not only that.
U.S. demand for refined petroleum products fell 3.9% in January 2016 from the previous month. So the market is flooded with oil (inventories are literally hitting new highs) at the same time the market is demanding less of it.
The demand picture doesn’t look like it’s going to improve in the near-term, either. The emerging markets and Europe are a mess, and EIA cut its 2016 and 2017 demand forecasts just this week.
And in a double-whammy to the economy, the shale bust has taken 100,000 jobs with it as well — over 15% of the oil workforce peak in 2014. That doesn’t even include “all the other job losses in the supply chain,” according to Reuters. From 10,000 railroad industry layoffs to steel workers making oil pipe, Reuters notes:
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