Oil services exchange traded funds, which typically sport intimate correlations to oil prices, have been among the most savagely beaten equity-based ETFs during oil’s decline.

Over the past month, the Market Vectors Oil Service ETF (NYSEArca: OIH) has steadied a bit, falling just 2.3%. “Just” 2.3% because OIH and the rival iShares U.S. Oil Equipment & Services ETF (NYSEArca: IEZ) are down an average of 24.6% over the past three months.

As has been the case with energy sector ETFs, OIH and IEZ have notable rallies since Dec. 15, surging an average of 8.7% since that date. The recent upside for oil services ETFs coincides with a steady decline in active rigs. http://www.etftrends.com/2014/11/shrugging-off-ma-oil-services-etfs-need-higher-oil-prices/

“The latest Baker Hughes rig count data showed that the total number of US rigs in operation — which includes both oil and gas rigs — fell by 35 last week, to 1,840 from 1,875. This is down from 1,920 for the week ended December 5. Oil rigs in use fell by 37 last week, while gas rigs actually rose by 2. For the week ending December 12, the number of oil rigs in use fell by 27, which at that time was the single biggest weekly decline in two years. The following week, the number of rigs in use fell by 18,” reports Myles Udland for Business Insider.

Rig counts typically fall in unison with oil prices, but the recent oil decline is seen by some market observers as particularly worrisome. Saudi Arabia, OPEC’s largest producer, has refused to cut output to support prices, hastening a 41% three-month plunge for the United States Oil Fund (NYSEArca: USO). On Monday, West Texas intermediate futures closed at the lowest levels in over five and a half years. [Oil ETFs, Sector Funds Take Different Paths]

While any bounces can be seen as good news for downtrodden oil services stocks and ETFs, it can be argued these bounces come with asterisks and there is still some glum news to be absorbed by the energy sector. For example, the energy sector has recently been the most shorted in the S&P 500, indicating some of the group’s recent upside has come by way of short covering. [More Declines Seen for Energy ETFs]

There has been rampant speculation that Transocean (NYSE: RIG) will cut its dividend and as of Dec. 9, short interest in that stock was 15%, according to the Wall Street Journal. Other oil services names with elevated short interest, each hovering around 13% of shares on loan are Diamond Offshore (NYSE: DO) and Noble (NYSE: NBL), reports the Journal.

A separate Journal piece highlights the impact falling oil prices have on services providers.

“Tom Runiewicz, a U.S. industry economist at IHS Global Insight, forecasts companies providing support services to oil and gas companies could lose 40,000 jobs by the end of 2015, about 9% of the category’s total, if oil stays around $56 a barrel through the second quarter of next year. Equipment manufacturers could shed 5,000 to 6,000 jobs, or about 6% of total employment for such companies,” reports Jeffrey Sparshott.

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