Oil prices spiked lower once again after China's stocks fell again. Oil prices can’t get a grip even with U.S. stocks rebounding and the dollar holding steady. The Shanghai Composite closed down 5.3%, and the Shenzhen Composite ended 6.6% lower. Speculators cut net-long positions 24% in a week according to data and hedge funds that lowered bullish bets to a five year low.
The falling U.S. rig count should start to have a larger impact of U.S. oil output. The U.S. land rig count was down 37 this week and the land horizontal rig count was down 30 which was the largest one week drop since March of 2015. This comes after a bad year for oil and gas where the total number of companies to file for bankruptcies last year were 42 and the expectations that number could more than double in the coming year. The combined debt of bankrupt companies in 2015 were $17.85 billion, split about 50.4% secured to 49.6% unsecured debt. Arch Coal (N:ACI), not oil and gas, did announce a bankruptcy overnight. That is driving that stock sharply lower.
Gas prices are falling. According to the Lundberg Survey gas prices fell just one cent per gallon over the last three weeks to $2.05, according to a Lundberg survey. Gas supplies surged last week because of some seasonal adjustments and flooding in the middle part of the country. We should see those numbers level off.