Baker Hughes Reported Another Drop In The US Oil Rig Count Last Week

Energy markets are mixed to start the week, with ULSD trying to move higher for a 2nd day, while gasoline and crude oil prices hold just below breakeven in the early going. Friday’s big recovery rally fizzled in the last hour of trading and prices failed to threaten the downward sloping trend-lines on the weekly charts, which sets up the chance for another sizeable price drop in the coming weeks if we don’t see a sustained rally soon.

Baker Hughes reported another drop in the US oil rig count last week, with a net decrease of 2 rigs, bringing the total to the lowest level since January 2022. Natural gas rigs held at 118 last week and have been essentially unchanged since early September. A Reuters article Friday suggests that oilfield services companies are preparing for a rough patch in the months ahead with little hope for an increase in drilling rates.

The Commitments of Traders weekly report data is delayed until this afternoon due to the Federal Government sort of recognizing Veteran’s Day on Friday. It seems highly likely that we were watching some heavy liquidation by money managers during last week’s sell-off, but since that report is compiled with positions from Tuesday, we may not see the full picture of what happened until the next report on Friday afternoon.

OPEC officials tend to agree with that expectation, citing speculators for the recent drop in oil prices in its monthly oil market outlook, while holding their demand forecast for steady growth in 2024. The report specifically highlights Chinese crude imports as a driver of the strength in oil demand, despite “overblown negative sentiment” about economic activity in the world’s largest importer. OPEC officials also cited strong demand in the US, with a resurgence in airline traffic the key driver, while vehicle miles traveled is also showing signs of strength.

OPEC’s oil production ticked higher by 80mb/day during October, the 2nd month of increased production, as gains in Iran (who the US continues to allow to bypass sanctions) and Angola offset declines in Saudi Arabia and Kuwait.

While Accuweather declared an early end to the Atlantic hurricane season last week, the NHC is giving 60% odds of a new system developing in the Caribbean this week. Early forecasts suggest that it’s unlikely this storm will develop into a threat for the US, but it could add moisture to a cold front heading towards the East Coast at the end of the week.

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