The lemmings have reversed course from the Brexit precipice, distracted by a bright, shiny new object: the latest data showing US crude oil inventories fell by an unexpectedly large volume last week—4.1 million bbl. The result was the biggest gain for crude oil prices in more than 2 months, bringing NYMEX prompt-month crude back to near $50/bbl, encouraged by the decline in stock levels and the then- imminent prospect of a partial North Sea production shutdown due to a threatened strike by Norwegian oil workers. After closing at $49.88/bbl on Wednesday, NYMEX crude was trading lower early Thursday because of a strengthening dollar, a dissipating strike threat, and likely book-squaring ahead of the prompt month contract’s approaching expiration. Brent was slipping a bit as well early Thursday but remained above $50/bbl at present time. It’s likely that another contributor to the recent oil price rally was the reality check among traders that, whatever its long-term impact might mean, “Brexitaggedon” is not just around the corner.
The US land rig count is playing its part in price volatility as well, despite traders’ insistence on ignoring our repeated attempts to remind them that weekly rig count swings have zero impact on near-term oil and gas supply. Perhaps the week-to-week slip of 2 units in this report somehow convinced this excitable cohort to breathe easier by thinking that the oil glut won’t return tomorrow (News ash: It hasn’t gone anywhere—even after last week’s 4.1 million bbl drop, US crude stocks at 527 million bbl still are at historically high levels for this time of the year.)
In any event, the average rig count of 374 for the month of June is up by 7% from May’s 348. The last time the rig count actually increased month to month was in July 2015. That’s a course correction we can live with.
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