Please try another search
Oil remains stubbornly stuck in a sideways range despite the dollar's rally and other risk assets' retreat over the past week and a half, with weekly production and commercial inventory data painting a relatively contradictory picture.
US commercial crude inventories continue to rise steadily, increasing by 7.6m barrels to 479m barrels last week. Commercial inventories have only been higher during the glut of 2016-2017 and the first, most severe cutbacks of 2020. We also pay attention to the accumulation rate, as stocks are now 15.1% higher than one year ago.
The US government has postponed its start to replenish stocks, even though it has hardly sold any oil since the beginning of the year. Price stability seems to force the US to postpone its plans to buy oil in reserve, not to push up prices and inflation further.
The sharp rise in inventories has been seen while production has stabilized at 12.3m BPD for the past three weeks. Compared to how America ramped up output from mid-2011 to mid-2015 and from October 2016 to March 2020, we now see a creeping increase. Judging by this dynamic, the US is in no hurry to regain the oil market share that Russia and OPEC are losing.
An even more cautious view on the outlook for oil demand suggests a trend in the number of rigs in operation. According to Friday's Baker Hughes report, the number of oil rigs fell to 600 last week, down slightly from a peak of 627 in early December last year.
The conventional wisdom is that the trend in drilling activity is 6-9 months ahead of the direction in production. Still, a gradual increase in production efficiency can explain the slight current reversal. Only catastrophic collapses in this indicator, such as in 2014-15 and 2020, are worth paying attention to. The long-term price trend, in turn, determines the dynamics of drilling activity.
Over the past three months, WTI crude oil has been bought on declines towards $73, driven by both OPEC+ production cuts and signs of a stronger economy. However, suppose the Fed does indeed cool the economy to the point of lower demand. In that case, local support is unlikely to withstand selling pressure, opening the way for prices to fall until a change in Fed policy is announced.
Europe has diversified crude oil sources, albeit at a higher cost Saudi Arabia and the U.S. have become more important crude oil suppliers Russian-made diesel imports have also...
Gas market at pivotal stage between end of storage draws and start of injection The just-ended winter, one of the warmest, has left incredible gas balances Challenge now is for...
Gold mining stocks and silver are the riskier parts of the precious metals sector. Generalist capital always favors gold first and second before considering miners and silver. Gold...
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
I feel that this comment is:
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Enrich the conversation, don’t trash it.
Stay focused and on track. Only post material that’s relevant to the topic being discussed.
Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.