As Reported In The July 7th, 2016 RADAR Report
Are current oil prices supported by a market balance or the onslaught of production outages from Canada, Nigeria and the North Sea? Recently, production outages due to events around the world have helped ease supply glut worries, propping up crude prices along the way. However, inventories of refined products are building, and global demand growth continues to be sluggish, which may cause WTI and Brent crude prices to dip before they can resume their climb to $60/bbl that markets are hoping for.
EIA reported oil inventories dropped by 2.2 million bbl for the week ended July 1, which was less than the 2.3 million bbl analysts expected to see. However, API reported a 6.7 million bbl for the same period, confounding market uncertainty to the market.
Refined products, notably gasoline, appear to be forming a glut, which could cause oil demand to decrease and negatively affect crude prices. Even though we have been in the busiest driving season of the year, US gasoline inventories increased to 239 million bbl. US stockpiles are now 22 million bbl higher than they were at this time last year. Currently, while demand for gasoline in the US is at record levels, refiners have managed to crank out more product than there is demand for.
Rig count jumps
That said, operators are feeling a bit more sanguine about drilling prospects, deploying a few more rigs to the field. Our latest rig count stopped just short of a welcome milestone of 400—at 399 an 18-unit gain vs. the prior week and 16 more than the previous issue of this edition of the RADAR Report.
The unconventional drilling market share of the rig count reached its highest point since May, with a 23-unit gain offsetting a decline in conventional drilling.