US drillers added 13 rigs to the number of oil and gas rigs this week, according to Baker Hughes, adding 10 active oil rigs and 3 active gas rigs. The oil and gas rig count now stands at 1,045—up 160 from this time last year.
Meanwhile, neighboring Canada lost 7 rigs for the week—the latest in a string of losses. Gas rigs in Canada are now fewer in number than they were a year ago.
Both the Brent and WTI benchmark were trading down on the day at 10:00am EST after reaching almost three-year highs earlier in the week over U.S. President Donald Trump’s announcement that the US would withdraw from the nuclear deal, combined with Venezuela’s falling production. WTI was trading down 0.32% at $71.13, with Brent trading down 0.30% at $77.24. Western Canada Select (WCS) was trading down a staggering 4%, increasing its discount to WTI.
Oil prices seem to be stuck in a perfect storm, a culmination of several geopolitical factors which include Iraq’s election scheduled for Sunday, the likes of which could see delays for project approvals and licensing awards; Venezuela’s election scheduled for May 20 which may prompt the United States to up the sanctions against Maduro’s socialist regime; the nuclear deal announcement which could restrict Iran’s exports, and OPEC comments that it would ramp up production to fill the void left by Iran if necessary.
US oil production rose again in the week ending May 04, reaching 10.703 million bpd—the eleventh build in as many weeks—about 300,000 bpd shy the 11.0 million bpd forecast that many are predicting for 2018. Earlier this week, the EIA raised its US production forecast for 2018 and 2019, anticipating that the full-year production for the United States will be 10.7 million bpd, with 11.9 million bpd forecast for 2019—a 400,000 bpd increase over its forecast last month.
At 8 minutes after the hour, WTI was trading down 0.42% at $71.06, with Brent trading down 0.10% at $77.39.
By Julianne Geiger for Oilprice.com
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Second, at the start of the US shale oil revolution in 2008, rising shale oil production went hand in hand with increasing number of rigs deployed. Now, adding new rigs is starting to face diminishing returns meaning that the rise in shale oil production is no longer commensurate with the number of rigs added.
Even with claims about rises in US oil output to 10.7 mbd, strong bullish oil fundamentals will trump the impact of these rises on oil prices.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
This truly is a good thing, because it keeps those folks well employed in the petroleum industry and refining businesses (e.g., Valero Energy is the largest refiner in North America and its corporate headquarters are less than 15 minutes away from where I live). See, Americans don't exploit this natural resource...we use it to get to everyday jobs and of course, restaurants and shopping later on. But most of us live by modest means.
That is why I insist on leaving comments here at OilPrice.com which may seem bearish but mostly reflect modest price increases or mild decreases over time. Not the fact that the price of WTI is up almost $30/bbl since last Summer, reflecting a 70% increase which exceeds that of any company's stock listed on the Nasdaq (Composite index of 100 stocks), or the S&P 500, or the DJIA. Now you know my concern when those oil bulls or foreign producers jawbone of prices at $80, $82.50, $88, $100, or even $300/bbl. Most of those folks do not live modestly, but are hedge fund managers, or folks like the Saudis, Emirates, Kuwaitis, etc. who do very little for their "treasure".