Are Rig Counts a Predictor of Oil Prices?

Rising Rig Counts Do Not Predict Changes to Crude Oil Prices. Since December 2018, both crude oil prices and the number of active rigs as reported by Baker Hughes have risen. It is well known that these variables are highly correlated with each other so their recent co-movement is not surprising. Little research, however, tries to untangle the less obvious causal relationships between these variables and the little that we have seen yields mixed results. We thus set up our own model to see if news about rig counts is helpful for forecasting oil prices. We find that it is not. Rig counts predict neither oil prices nor economic growth, and a forecaster can safely ignore them.