Oil prices rise as rig count drops

The price of oil jumped on Wall Street on Friday while the number of rigs searching for oil and gas in the United States continued to plummet.

The benchmark U.S. crude price rose $1.57 to $52.78, ending the week on an upswing.

At the same time, the domestic rig count declined by 98 this week to 1,358, according to Baker Hughes, the Houston oil field services company. In its report, the firm said 1,056 rigs were looking for oil and 300 for gas. A year ago, 1,764 rigs were active.

Texas, at 56, lost the most rigs among the major oil- and gas-producing states, according to the report. New Mexico lost 12, North Dakota nine, Colorado six and Oklahoma five.

In the Barnett Shale, the number of rigs fell to 10, two fewer than last week, according to a report by RigData. Tarrant, Denton and Jack counties had two each, while Johnson, Montague, Parker and Wise had one each.

While it might seem that one is tied to the other — fewer rigs are searching for oil, so production falls and prices go up — analysts say not so fast.

Domestic crude production averaged an estimated 9.2 million barrels a day in January, and the U.S. Energy Information Administration forecast this week that it will hit 9.3 million in 2015.

The declining rig count may not affect oil prices for at least six months, said Anastasia Shcherbakova, an assistant professor of finance and managerial economics at the School of Management at the University of Texas at Dallas.

The world still has an oil glut as economic slowdowns in Europe and China weaken demand, she said. While the rig decline has been steeper than expected, fueling optimism in the market, oil prices may drop into the low $40s or high $30s before hitting bottom.

“It is difficult for me to see that the glut will disappear as quickly as anticipated,” Shcherbakova said.

This story was originally published February 13, 2015 at 6:16 PM with the headline "Oil prices rise as rig count drops."