As oil prices continue to climb, Texas rig count continue to grow. For the week ending Feb 5, 2021, Texas added an additional 7 rigs to its count. That brought the total Texas rig count to179 drilling rigs operating in the state. Although Texas rigs are increasing, they’re still not close to last year’s count when the state operated 394 rigs (a delta of 205 rigs). Most of the growth was concentrated in the Permian basin in Southwest Texas. That is where oil fields are being re-drilled using modern day drilling techniques, like fracking. While most of the Permian rigs operate in Texas, some are found in New Mexico. In total, 198 drilling platforms currently operate in the Permian with a total of 61 rigs drilling in the state of New Mexico.
Effect of the 2020 election on US drilling
With the Keystone XL Pipeline being shuttered by the Biden Administration and the apparent “war on oil” beginning to pick up steam, drilling in the U.S. will remain somewhat muted; however, increasing oil prices may push drillers into deep water operations. Transocean (Ticker Symbol: RIG), for example, recently saw it’s stock price climb to $3.50/share (a 400% increase from this past November) as oil prices approach $60/barrel. Adding to the bullish backdrop, growth forecasts continue to improve as the Coronavirus pandemic subsides with more global economic activity seen in a number of the world’s more developed countries.
Oil storage continues depletion
In their latest report, the EIA (U.S. Energy Information Agency) reported that 10,000 barrels were taken out of the inventory during a time when inventories typically build. This is a very bullish signal for (and the main reason) oil continues to trade at an elevated level. This translates to higher gas prices throughout the American economy. According to AAA, current average gasoline prices are $2.46/gallon. This represents a 40% increase from this past April when prices were around $1.74/gallon. Since the Biden administration has now brought in people tied to oil industry lobbyists, gas prices may remain elevated and even go higher from here.
How to invest in higher gas prices
If you’re looking to make some money from higher gas and oil prices, you can reach into the markets for some decent opportunities. This is not investment advice, so please use your own due diligence before investing. That said, look at the drillers and refiners of oil-based products and services. Companies like Halliburton (HAL) and Exxon Mobile (XOM) are obvious “no brainers”. Companies like Transocean (RIG) are a little more risky, but you can use a covered call or naked put strategy to minimize (and hedge) your risk, while still participating in the apparent rise in oil prices.
