Where Are The Oil Drillers?

Note: This article appeared originally in the April 22, 2026 issue of The McClellan Market Report.

The war with Iran and the shutdown of oil shipments from the Persian Gulf caused a big spike in oil prices.  That means anyone with oil is now making a lot more profit from selling it.  Good for them.  But it has created a bit of a mystery - - Why are US drill rigs not responding to this price change?  Why are landowners not responding to the higher prices by drilling for oil?

This week's chart compares the Baker Hughes data on US rig counts to near month crude oil futures prices.  This seems like an obvious place to find a relationship, but the correlation is not that good.  So why not?

Digging deeper into the data provided an answer.  A primary point to note is that Baker Hughes (a company which supplies drill rigs and thus wants to keep track of its customers) only counts a rig once it is set up and actually in operation.  So new projects which have a rig traveling to get there, or just starting to get set up, do not count.  There is a lag time in the response to prices.

Further, it is not the near month price that is the deciding factor to order a drill rig.  A newly operating rig is not going to benefit from a temporary spike in oil prices.  Oil producers instead respond to price changes further out on the futures maturity spectrum.

So here is a chart that looks at the price of the oil contract 11 months out.

After some tinkering, I found that shifting those far-month prices forward by 13 weeks gets the best overall fit to the drilling rig data.  The war with Iran did not cause the far month oil futures contracts to spike as much as the near month ones, but there has been a spike.  And we are only now getting to the inflection point when that price response should start showing up in the rig count data. 

Using this 13-week offset gets a much better fit between the plots.  It does not necessarily predict the magnitude of the change in rig counts very well, but it gets the direction mostly right.  The importance to investors is that stocks of companies tied to operating drilling rigs should be expected to do better over at least the next 13 weeks.