Echoing the criticism of too much hype surrounding U.S. shale from the Saudi oil minister last week, a new report finds that shale drilling is still largely not profitable. Not only that, but costs are on the rise and drillers are pursuing "irrational production."
Commodities are on fire as the economy in the U.S. leads the world in a commodity consuming growth period. Lumber surged to all-time highs and industrial metals are strong as manufacturing and factory growth around the globe is strong. Crude oil prices are pulling back after a rise in the rig count even though it’s making up for lost time after the big freeze down south.
Commodity prices were on fire on Thursday morning, still soaring after comments by Treasury Secretary Steve Mnuchin that the weak dollar was good for the U.S. economy. European Central Bank President Mario Draghi then weighed in and seemed aghast at the remote possibility that someone in a high governmental position might make a comment to weaken their currencies.
U.S. oil inventories continued to streak lower for a record-breaking 10 weeks in a row even as U.S. oil production is approaching record levels. Now, a weak dollar environment and more talk from Davos from the major oil players are driving oil ever higher.
More folks are joining the call for $80 a barrel of oil in the new year, a level I had previously predicted would happen, assuming OPEC and Non-OPEC would keep their production cuts in place. Now with news coming out of the World Economic Forum, in Davos Switzerland, there is a lot of things happening that bolsters that case.
Crude oil and coffee set commercial trader net position records in November. WTI crude oil set records in both net and total position sizes. The WTI market has remained under $60 per barrel since November of 2015. May of 2016 saw the Baker Hughes rig count bottom at 318. There were nearly 1,500 rigs up and running in Q4 of 2015 when oil prices began falling precipitously. Currently, about 750 rigs are operating. This metric has been steady since early May of 2017.
Crude oil prices are consolidating as the global economic forecasts are driving demand expectations higher as U.S. oil inventories continue to plunge. After a record one-week drop in supply last week at Cushing Okla., the market is getting ready for yet another steep drop at that point. This comes as the International Monetary Fund (IMF), in its World Economic Outlook released yesterday, is reporting that U.S. tax cuts will ramp up investment not only in the United States but among its trading partners.
Traders laughed off the International Energy Agency’s "no change in demand forecast" because it is clear to all non-biased readers that demand is going to grow in the next year. Their prediction of so-called "explosive” shale oil production growth is also being brought into question. For a major reporting agency using hyperbole like the word "explosive" seems like a desperate attempt to get attention and try to get attention to support the position of the consuming countries that they represent. We know that demand is strong and we are seeing it week after week.
The International Energy Agency came out with an “explosive” report talking about “explosive” production growth as the United States will become the undisputed leader in global oil production. Take that Saudi Arabia and Russia! The agency that is known by traders as the agency that has way underestimated, is now proclaiming the United States as the new global energy powerhouse, a moniker by the peak oil freaks and the Obama Administration that was thought to be impossible.