Petroleum News

Nothing but bullish news to fit the current market rally back up to $50 per barrel. Saudi Arabia has been doing their best to cut exports of oil to the US to help shrink the supply. Hedge Funds have been piling back into the crude oil market as last week the Saudis were back in New York courting all the big banks and hedge fund traders. Nothing like trying to politic your own price move… I guess its easy to do when Saudi Aramco is expected to be the biggest IPO ever worth over a trillion dollars and you can spread all that offering around to everyone. US refineries are cranking out production like nobodies business at 96.3% of capacity and a records 17.861 million barrel per day of crude oil are running through. But yet distillate stocks were down 1.7mb. Gasoline did build but we are also exporting a lot of this gasoline. Most of the build in gasoline came because of cheaper imports to our east coast.
DOE stats were bullish for crude and surprise, distillate! Seasonally gasoline should be drawing as we are in the midst of summer driving demand, but it is distillate that is pricing higher and drawing inventories. While U.S. crude inventories remain high versus the 3-year average, product inventories have been approaching the average levels. Geopolitical risks will likely be the key price driver to break crude out of the range-bound trading levels we have seen for most of the year. Weather could also be a driver if a significant hurricane were to impact the Gulf infrastructure. Otherwise, we could continue to see this tight trading range through the end of 2017 and possibly into 2018 if OPEC efforts are not productive in the coming months.
The U.S. rotary rig count from Baker Hughes was down 4 at 954 for the week of August 4, 2017. It is 490 rigs (105.6%) higher than last year. Most interesting in this weeks data was the 7 rig drop in offshore drilling in the Gulf of Mexico. Five were targeting oil and three were targeting natural gas.The number of rotary rigs drilling for oil was down 1 at 763. There are 384 more rigs targeting oil than last year. Rigs drilling for oil represent 80.2 percent of all drilling activity. Rigs directed toward natural gas were down 3 at 189. The number of rigs drilling for gas is 108 higher than last year’s level of 81. Year-over-year oil exploration in the U.S. is up 100.8 percent. Gas exploration is up 133.3 percent. The weekly average of crude oil spot prices is 21.2 percent higher than last year and natural gas spot prices are 2.5 percent higher than last year. Canadian rig activity was down 3 at 217 for the week of August 4, 2017 and is 95 (77.9%) higher than last year. Rigs targeting oil were up down 5 at 124 and are 64 (106.7%) higher than last year. Gas directed rig count at 93 was up 2 and is 33 rigs (55.0%) higher than last year. Canadian drilling falls rapidly in the spring to avoid environmental damage moving drilling equipment during the spring thaw and rainy season. With large weather related seasonal swings, even year-over-year comparisons can lead to incorrect conclusions.