Oil Prices Bristle As U.S. Rig Count Climbs

 Oilprice.com

Oil Prices Bristle As U.S. Rig Count Climbs

Baker Hughes reported a 10-rig increase to the number of oil and gas rigs this week. The total number of oil and gas rigs now stands at 1003, which is an addition of 164 rigs year over year.

The number of oil rigs in the United States increased by 11 this week, for a total of 808 active oil wells in the US—a figure that is 136 more rigs than this time last year. The number of gas rigs held steady this week, still at 194; 29 rigs above this week last year.

The oil and gas rig count in the United States has increased by 80 in 2018.

While US drillers seem determined to add rigs, Canada continued its brutal losing streak, with a decrease of 23 oil and gas rigs, after losing 168 rigs last week in the four weeks prior. At just 111 total rigs, Canada now has 21 fewer rigs than it did a year ago.

Oil prices were trading down on Friday, with West Texas Intermediate trading down $0.27 (-0.42%) at $63.27 at 9:17am EST. The Brent benchmark was trading down $.011 (-0.16%) at $68.22. Price pressures persisted on Friday as the China and US trade tiff heated up, with President Trump announcing billions in additional tariffs in a tit-for-tat measure after China’s latest round of tariffs. Also weighing on prices this week is the ever-present threat of climbing US crude oil production, which rose again in the week ending March 30, reaching 10.460 million bpd—the sixth build in as many weeks—well on its way to the 11 million bpd mark that analysts see coming in 2018.

At 8 minutes after the hour, WTI was trading at $62.41 (-1.78%) and Brent was trading at $67.43 (-1.32%).

By Julianne Geiger for Oilprice.com

Oil trades roughly flat in thin volume ahead of Christmas holiday weekend

CNBC

  • OPEC-led production cuts are still supporting the market.
  • Traders started closing positions ahead of the Christmas and New Year holidays.
  • Climbing U.S. output will weigh on oil markets in 2018 and 2019, Rystad said.

Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Jonathan Alcorn | Reuters
Oil jack pumps are pictured in the Kern River oil field in Bakersfield, Calif.

Oil prices traded roughly flat in light volumes on Friday, staying near their highest levels since 2015 on pledges from OPEC leader Saudi Arabia and non-OPEC Russia that any exit from crude output cuts would be gradual.

U.S. West Texas Intermediate (WTI) crude futures ended Friday’s session 11 cents higher at $58.47.

Brent crude futures, the international benchmark for oil prices, ended the session up 35 cents at $65.25 a barrel, its highest close since June 2015.

Both contracts settled one hour early due to the upcoming Christmas holiday. Market liquidity was also drying up on Friday as traders closed positions ahead of the Christmas and New Year breaks.

About 280,000 front-month U.S. crude futures changed hands while front-month Brent crude futures saw the lowest trade volumes in about seven months, excluding expiration days.

Saudi Arabia has to be ‘absolutely delighted’ with the oil market  

An earlier dip on Friday was due to an outlook for rising supplies that triggered those holding long positions to sell-out ahead of the year-end holidays, traders said.

Also weighing on the market was the expected return of the 450,000 barrels per day (bpd) Forties pipeline system in the North Sea in January.

The pipeline, which delivers crude underpinning Brent futures, was shut earlier this month due to a crack. Operator Ineos said on Thursday it expected to complete repairs around Christmas and to gradually restart the system in early January.

Oil prices have recovered in the past year on the back of oil production cuts by OPEC, Russia and other producers, helping reduce the global inventory overhang.

Russian Energy Minister Alexander Novak told Reuters OPEC and Russia would exit cuts smoothly, possibly extending curbs in some form to avoid creating any new surplus.

“There is a consensus among the (oil) ministers that we should avoid oversupply on the market when exiting the deal,” Novak said, comments that will calm investor worries that Moscow wants a speedy exit.

Saudi Energy Minister Khalid al-Falih said it was premature to discuss changes to the pact on supply cuts as market rebalancing was unlikely to happen until the second half of 2018.

Commodities tomorrow:

Commodities tomorrow: Crude oil trades higher  

The OPEC-led pact to withhold supplies started in January this year. The producer group and its allies agreed to extend the cuts cover all of 2018 from their March expiry. The supply restraint has reduced oil inventories and helped push up Brent by more than 45 percent since June this year.

“OPEC’s extension of its production cuts through the end of 2018 is a necessary condition for continued inventory drawdown,” U.S. investment bank Jefferies said.

Jefferies said it has raised its 2018 Brent forecast to $63 a barrel from $57, and its WTI forecast to $59 per barrel from $54, on expectations that the market will remain tight.

Novak said some pressure on prices was possible in the first quarter of 2018 when demand traditionally declines and added he saw prices hovering at around $50 to $60 in 2018.

Analysts said crude output in the United States, fast approaching 10 million bpd, would be a drag on prices in the longer term.

“Supply is expected to grow further, paving the way to an oversupplied market, which can again exercise downward pressure on oil prices,” consultancy Rystad Energy said.

MOVES-China’s Rongsheng hires crude oil trader in Singapore

December 5, 2017
Reuters Staff

SINGAPORE, Dec 5 (Reuters) – Chinese conglomerate Zhejiang Rongsheng Holding Group has hired a senior crude oil trader to be based in its Singapore office, a company official said on Tuesday.

Trader Ray Liu, formerly from BB Energy and Sinochem Corp, will join Rongsheng International Trading Co in January, said the official who declined to be named.

Rongsheng plans to start up its 400,000-barrels-per-day refinery-petrochemical project in eastern China in late 2018.

The company set up a trading office in Singapore last year which will handle crude purchases as well as the trading of oil products and petrochemicals.

Rongsheng is looking to hire more crude and oil products traders as it plans to expand operations in Singapore, the official said.

The oil market just did something it hasn’t done for nearly three years

CNBC

  • Traders are paying more for oil on immediate delivery
  • Oil prices have risen for four consecutive months
  • Improved OPEC compliance is driving the oil price higher

Oil traders on the floor of the New York Mercantile Exchange.

Getty Images
Oil traders on the floor of the New York Mercantile Exchange.

Oil traders just provided another sign that the market is rebalancing.

The WTI calendar spread for the next six months moved from “contango” into “backwardation” Tuesday. To explain, a calendar spread measures the difference in price between any pair of oil contracts with different delivery dates and can explain the current supply-demand balance in the market.

These oil futures contracts are financial instruments that carry legally binding obligations — so a buyer and a seller have the obligation to take or make delivery of an underlying instrument, such as oil, at a specified settlement date in the future.

In this particular case, the spread or measure is of the next month’s oil contract against another in seven months from now. This is otherwise known as the 6-month spread, and currently underscores a growing level of immediate demand for WTI crude as inventories shrink.

According to Reuters data, it is the first time this measure has slipped into “backwardation” since November 20, 2014.

Backwardation is when the current price of oil is higher than a future cost of oil. It is seen as a sign of higher immediate demand. Conversely, contango is when the futures price of oil is higher than the spot delivery price.

As the chart below indicates, WTI has just moved into backwardation, while Brent crude — on the same 6-month spread basis — moved into backwardation earlier this year.

Reuters | John Kemp

Oil prices extended gains in early trade Tuesday after fresh data revealed that oil cartel OPEC had improved its level of compliance considerably.

A Reuters survey for October released Wednesday estimated that 11 oil producing nations had achieved 92 percent compliance with supply caps previously agreed by OPEC. This number has risen from the 86 percent compliance measured in September.

Dwindling exports from northern Iraq has helped to push prices up further recently. Iraq curtailed its output by 120,000 barrels per day in October after its military retook control of oil fields from Kurdish forces.

The oil price gained 7 percent in October, marking the fourth consecutive month of gains.

The price of oil collapsed from near $120 a barrel in June 2014 due to weak demand, a strong dollar and booming U.S. shale production. OPEC’s reluctance to cut output was also seen as a key reason behind the fall. But, the oil cartel soon moved to curb production — along with other oil producing nations – in late 2016.

Reuters contributed to this article.