The weekly Baker-Hughes U.S. crude oil rig count has come in at 405, up by 8 from last Friday. However, the summer rush for North American crude oil producers may be short-lived. WTI prices are down again today, trading near the $62.50 area. August has been the worst month for WTI and USOIL since March 2020.

Once again, the drivers of this week’s 8+% loss are twofold. First, the global demand outlook is weakening due to the Delta variant. Second, the USD continues to hold its ground amid talk of Fed QE tapering. If you factor in the approaching fall and winter seasonality of WTI, then it’s reasonable to take a intermediate-term bearish stance toward crude oil.

From a long-term technical perspective, a bullish bias toward WTI and USOIL remains warranted. Prices are holding above the 38% Fibonacci retracement of 2020’s low to 2021’s high; but, the 38% retracement of November 2020 low to July 2021 high is being challenged. This is a key level to watch for USOIL and comes in at $60.42. As long as the $60.00 area holds up as support, a monthly bullish bias is warranted. 

Without a doubt, those running the North American oil rigs are cheering for bids at $60.00.

U.S. Oil Rigs Up 8, WTI Crude Oil Down Nearly 2%

It’s important to respect the depth of August’s sell off. USOIL is down nearly 16% in its worst monthly showing since March 2020’s COVID-19 panic. If $60.42 falls, then we are likely headed to $55.00 in short order. Should this scenario unfold, today’s uptick in oil rigs will seem a bit premature.

Overview: Right now is a confusing time to be trading crude oil. Although the intermediate and long-term technicals show uptrends, the fundamentals say otherwise. The keys to oil prices are the Delta variant and USD strength. 

If we see late-2021 Fed tapering, coupled with U.S. Delta variant lockdowns, prices will plunge very quickly. Unfortunately for this summer’s new oil rig startups, the outcome could be disaster.