Crude oil prices are trying to recover on a weak dollar after selling off yesterday on the August oil future contract expiration. Also on a prediction by the Energy Information Administration (EIA) that US oil production would rise by 113,000 barrels a day to 5.585 million barrels a day in August from July, even as they overestimated Junes production by a wide margin.
While the rig counts rise, it is slowing the profits for shale operators and the cost of production is going up. Baker Hughes reported that drillers added just two oil rigs and during the last four weeks rig additions were the lowest since November. Smaller shale firms are feeling the pain and the economics in the shale patch will cause the reporting agencies to once again lower the U.S. oil production forecast.The Energy Department on Tuesday lowered its forecast of U.S. oil production next year by 1% in what may be the beginning of a trend.
Crude oil prices have been creeping higher four days in a row as OPEC plans an “emergency technical meeting” July 24. The move is tentative as the market is still buying into the invincibility of shale oil production and this myth that the global oil market is not balancing. The International Energy Agency tried to feed into that myth by suggesting that OPEC compliance is slipping, offsetting what is a surge in global oil demand.
Despite a record drawdown from U.S. oil inventories and the fact that Saudi exports to the United States are at a 30-year low, the International Energy Agency is backtracking its prediction of a global oil market rebalancing because of an increase in OPEC oil production.
Crude oil prices are getting a wake-up call after a lowering of the U.S. oil production outlook--a report of a major drop in U.S. oil supply and a warning by S&P to oil majors cut to back more and reduce debt levels or face downgrades.
It appears that equity markets have taken inspiration from the performance of the financial market at the conclusion of last week, with Asian stocks trading broadly higher and European shares looking positive at the time of writing.
Believe it or not the globe is headed for an oil shortage. I know many find that hard to believe, especially in this shale-crazed world where there is the belief that shale oil will fill all voids, even as investment in oil exploration falls to the lowest level since the 1940s.
Rising yields and rising oil production is causing oil to plunge even as U.S. oil stockpiles drawdown at a record rate. The rebound in U.S. oil production of 88,000 barrels a day according to the weekly Energy Information Administration and was the key data factor that is causing the selloff. The market says that the 100,000 barrel drop in U.S. oil production was just a storm-related fluke and that U.S. oil production will continue to rise even as many producers at this price level will struggle financially.
Crude oil prices sold off almost 5% on what many people attributed to a story that some unnamed Russian oil company source said that Russia was against a production cut. Today those sources are still unknown, but really the sell-off in oil probably had more to do with the fact that Saudi Arabia cut prices to Asia as the kingdom was losing market share to Iraq and Iran that has been raising output and taking away business from the Saudis.
Crude oil prices are under pressure after an unconfirmed report was released that Russia would oppose and additional output cut and instead would stay the course on current cuts. Yet, an unsourced story from Bloomberg was enough to break oil that had been on a streak of eight up days in a row, one of the best runs in oil in seven years.