Rig count hangover bruises crude oil prices

Last week, both Brent and WTI crude oil traded in a $2.50 range as investors weighed the impact of the first oil cut from OPEC in eight years against rising USA shale oil output and high inventories.

Traders are shipping competitively priced crudes such as Russian Urals, Kazakhstan's CPC Blend, North Sea Forties and US West Texas Intermediate to replace Middle East staples from Oman to Abu Dhabi.

WTI crude has "found itself vulnerable to heavy losses.as the rising drilling activity in the USA reinforced the oversupply fears", said Lukman Otunuga, research analyst at FXTM, in a note. On Nov. 30, the cartel officially announced that its members would cut their production by 1.2 million barrels per day, while non-OPEC members would reduce production by an additional 600,000 barrels per day. Nevertheless, some analysts are hoping that the full outcome of OPEC's production cuts haven't been seen yet and that despite the increase in US production OPEC's cuts will show effect in April, as demand from refineries increases.

USA drillers boosted the rig count by 14 to 631 last week, data from Baker Hughes showed.

"We have already seen how worries of a border-adjustment tax moved the crude forward curve in the first few weeks following [President Donald] Trump's inauguration", said Troy Vincent, oil analyst at ClipperData.

Low demand and rising production could weigh down palm oil prices.

Riyadh led OPEC and other producers in December to reach their first deal since 2001 to curtail oil output and prop up weak oil prices which had strained many producers' budgets.

Nearly all Russian oil producers reduced the average daily oil production in March 2017, except Rosneft and Gazprom Neft. Crude prices have fallen 8% over the last two weeks, the biggest weekly drop in four months, and some industry experts have suggested the decline could continue for some time yet. The count climbed by 14 to 631, the highest level since September 25, 2015.

"An extension is needed to balance the market", an OPEC delegate said. According to the IEA, crude stocks over the course of just that month managed to increase by 48 million barrels (though we saw a modest drop in February). The report indicated that during the week before inventories of crude oil in the USA declined by 237,000 barrels, which goes against the normal trend of increases in crude inventories during this time of year.

  • Zachary Reyes