The Baker Hughes US oil rig count has decreased by nine, contributing to expectations of a decline in US oil production this year. There has been a drawdown in drilled-but-uncompleted wells, and the availability of Tier 1 inventory is limited.
At current prices, the economics of new wells make capital investment challenging, even with oil at $65 per barrel. Factors such as uncertainty and steel tariffs are leading companies to reduce their spending.
Wti Crude Price Movement
WTI crude has risen by $0.85 today, now trading at $60.90 amid a rebound in risk assets.
The existing content shows that oil producers in the US are under growing strain. Rig counts have dropped noticeably — nine rigs fewer — and that points towards less drilling activity going forward. This is not just about fewer rigs in the ground, though. It reflects a wider pullback in capital spending by producers. That in itself is driven by a few issues: high input costs tied to things like tariffs and uncertainty more broadly across markets. On top of that, companies are working through their backlog of drilled-but-uncompleted wells. Once those are gone, fresh production becomes harder to deliver without more rigs, which are simply not being added in this environment.
New drilling is only marginally profitable at these oil prices. Even with WTI hovering just under $61, the return on fresh investment often comes up short when compared with the cost of capital, especially for the less efficient producers. Not all rock is equal either — the best acreage, what we’d call Tier 1 inventory, is no longer as available. What remains is tougher to exploit, and more expensive. So we have a combination of lower rig counts, a shrinking backlog, and a narrowing margin for fresh exploration spending. That makes it unlikely for US production levels to rise meaningfully in the near term.
Wall Street’s Market Response
Wall Street’s response tells part of the story. With WTI crude gaining $0.85 on the day, pricing in a bounce in risk appetite, there’s also acknowledgement that tighter supply is nudging futures higher. But gains remain modest. From our point of view, that’s enough to suggest the market is watching supply trends, yet hasn’t fully re-rated expectations.
Looking ahead, there are two clear themes. First, domestic output pressures could add momentum to crude prices in the weeks ahead, particularly if macro conditions continue to recover and pull capital back into commodities. Second, it’s worth noting that the forward curve is still fairly flat. That doesn’t offer much incentive for carrying risk longer-term unless we see signs of tighter balances. Speculative interest is likely to stay linked to inventory data and forward supply signals rather than spot moves alone.
Volatility could pick up as a result. That may open up premium on shorter-dated options or widen spreads as bid-offers react to advancing momentum flows. If that happens, tactical positioning becomes more attractive — spreads and fly trades might offer better risk-reward profiles than outright direction. In such a setup, leaning into fat tails selectively or managing exposure through convexity is where we might place emphasis.
As inventory draws and well counts unfold, the numbers should speak quite clearly. And in an environment shaped by costs and tightening supply, the forward implications will be led more by what gets cut than what gets announced.
