Oil prices are slipping once again. According Bloomberg Energy, WTI Crude Oil is currently at $45.43 (-5.00% change) and Brent Crude closed $48.36 (-4.78% change) as I write this.
Today’s headlines will put a lump in your throat:
Before you get too worked up about the bad news and use of words like “tanking,” “plunged” and “gain wiped out,” hold your horses.
Let’s slow down and consider what is happening in more detail:
The CNN Money article states, “[t]he oil market’s OPEC bounce has completely evaporated” and that “[i]t’s the weakest level for oil since November 29, the day before OPEC finalized a deal to slash production in a bid to end the epic oil glut.”
The CNBC article states, “[o]il prices collapsed on Thursday to their lowest since late November as investor worries about the world’s stubbornly persistent glut of crude erased most of the gains that followed last year’s OPEC’s output cut.”
Rig Count: The rig count is also up from our last discussion in Commodities Taking a Tumble – Are Prices Going Down the Drain? According to the Baker Hughes Rig Count Overview & Summary Count, which can be found here, the rig count is up 13 from the prior count – up to 870 rigs in the U.S and that is up 450 rigs from about the same time last year.
What is are the takeaways?
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Many did not expect that the United States could ramp up production quickly if there was a bounce in prices – and those folks have been surprised.
Weekly U.S. Field Production of Crude Oil is charted by the U.S. Energy Information Administration (“EIA”) and can be accessed here. For example, by looking at the EIA’s 2017 weekly crude oil production chart, one can easily discern that for the week ending January 6, 2017, production was at 8,946 (thousand barrels per day) and for the week ending April 28, 2017, production was at 9,293 (thousand barrels per day). Those few months are just an example – many did not anticipate such a quick uptick.
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We are anxious to see what OPEC is going to do and whether the production cuts will be extended. The next meeting is reportedly scheduled for May 25, 2017 in Vienna, Austria.
For now, all we can do is hold our horses and wait to see what happens next.
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