I’m here to talk about $50 oil and that reality. As I presented in Mexico City this week, I started with my first slide that showed a $20 bill and then a barrel of oil flew in. I paused and then told the audience, “I like to start with a joke.” Yeah, I went there. I didn’t say as much about $50 oil, but in my heart I can see it coming. The EIA stats came out earlier that morning and we are finally seeing U.S. oil production catching up with the falling rig count. I’d guess that we’re going to break that 1999 low of 499 operating rigs today. We’re now producing 135K b/d less during the past 5 weeks and it’s likely that keeps falling for a few more weeks. I think that number is going to decline right into April.
Crude oil prices put in the best performance in weeks as refiners start to come out of maintenance and the announcement of a fuel swap with Mexico sent prices soaring. The Federal Reserve slowed the momentum by putting a December rate hike back on the table.