Two hundred and twenty-two years after the death of Marie Antoinette, and the crude complex is trying not to lose its head. After a week of dragging its feet and looking downbeat, oil prices are finally mustering a bounce into the weekend, as bad news is not good news….it’s great!
Crude is not only being led higher by gasoline, which is garnering support amid peak refinery maintenance, but is also finding some buying interest in the oxymoronesque results from oil services company, Schlumberger – for they were so bad they must bode well for future oil prices. Related: Can China’s SPR Rescue Oil Markets?
Schlumberger’s third quarter earnings made for pretty grim reading, as year-over-year revenue fell by a third, while profits were basically halved. As cost-cutting grips the U.S. oil industry (Schlumberger’s revenues from North American operations fell 46 percent), the prospect of further cost-cutting and capitulation is lending some support to prices at the end of a week of persistently bearish news. While on the theme of capitulation, the Baker Hughes oil rig count could drop below 600 rigs this afternoon, for the first time since July 2010:
Baker Hughes Oil Rig Count (source: investing.com)
In terms of economic data flow, Asia was quiet, while Eurozone inflation was in line with expectations; it continues to meander along a somewhat deflationary path, down -0.1 percent year-on-year in September. University of Michigan sentiment data is out in the U.S., while industrial production has shown a second consecutive month of contraction, dropping -0.2 percent. Related: U.S. Shale Is Too Adaptive For The Saudis To Kill
Focusing back on oil, the below graphic is a pretty stark illustration of the divide between low- and high-cost producers. IEA highlights that the capital cost of developing Canadian oil sands is one of the highest in the world, while Saudi’s onshore production is one of the lowest:
File under: random but interesting. The only member of the current exporting Arab Gulf region who is not a member of OPEC, Oman, has seen September oil production come in at 990,000 barrels per day, just shy of its record in July of just over 1 million bpd. Related: Is The Oil And Gas Fire Sale About To Start?
According to our #ClipperData, loadings are accordingly elevated, at 885,000 bpd for last month (mirroring Gov’t data). Its rising prominence has earned the nation an invite to next week’s OPEC + 8 technical meeting in Vienna (Azerbaijan, Brazil, Colombia, Kazakhstan, Norway, Mexico, and Russia are also invited) to discuss potential ways they can boost prices…while trying to avoid cutting production. Good luck, fellas!
Oman crude oil exports (source: ClipperData)
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By Matt Smith
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