Category: Peak Oil Review

Prices were up about $2 last week on an unexpected drawdown in US crude stocks and rumors that OPEC+ is considering another production cut. Forecasters see a supply glut continuing in 2020 due to slowing economies and growth in US shale oil production. Beyond that, prices could increase considerably as supply growth slows to a trickle. Goldman Sachs says that slowing US shale production growth combined with a shortage of investment in long-term projects will lead to a new boom.

Oil prices slipped last week with Brent down 1.8 percent to close at $59.42. WTI closed $53.82, down 1.7 percent. Concerns increased about China’s economy, which slowed to 6 percent year-over-year growth in the third quarter, the slowest growth in 27-1/2 years. Many outside observers of China’s economy have noted for years that GDP numbers are likely inflated due to the nature of China’s economic reporting systems. Crude inventories continue to grow with US crude inventories up by 9.3 million barrels in last week’s stockpiles report.

Oil prices rose 2 percent on Friday after the US and China seemed to hammer out a trade deal that postponed tariffs. However, after studying the details – or lack thereof – investors lost much of their enthusiasm. Crude prices were down about 2 percent on Monday on worries that global crude demand could stay under pressure. The few details about the first phase of a U.S.-China trade deal did little to assure a quick resolution to the tariff fight.

Oil prices have hovered in the mid to low $50s since late July. They spiked briefly into the low $60s after the Saudi oil facilities were attacked but quickly settled back on news that the Saudis would be able to repair the damage quickly. Conventional wisdom says that the Russian-Saudi production freeze is keeping prices from going lower. At the same time falling demand is holding a lid on prices despite slowing production and lower exports in several countries. Geopolitical risk has receded as the top concern of oil traders. To quote one trader, “everything is about weak demand now.”

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The US oil and gas rig count fell by eight this week, according to Baker Hughes, adding to months of losses, as US oil production falls to its lowest level since October 2018. The total number of active oil rigs in the United States fell by three, according to the report, reaching 776. The number of active gas rigs decreased by 5 to reach 169.

After six days of steady price drops that took prices down about $5 a barrel, oil rebounded about 1 percent on Friday. The rebound came on news that Iran had seized a British registered tanker while sailing in Omani waters through the Straits of Hormuz. Oil closed out the week at $55.63 in New York and $62.47 in London.

The storm in the Gulf of Mexico and geopolitical tensions in the Middle East pushed New York oil futures above $60 a barrel last week, with NY closing at $60.31 and Brent at $66.86. Nearly 70 percent or 1.3 million b/d of the Gulf’s oil production was shut in as oil producers evacuated 283 platforms in the northern Gulf. Natural gas production from the Gulf was cut by 56 percent. The slow-moving storm is producing unprecedented flooding, and it may be the middle of the week before the extent of the damage to onshore oil and petrochemical facilities is known.

Concerns about the weakening global economy and oil demand growth trumped Middle Eastern tensions and the OPEC+ rollover of the production cuts into 2020, sending oil prices lower for most of last week. Prices rebounded on Friday by a dollar or so with London futures closing out the week at $64.27, down about $2.50 from the week’s high on Tuesday, and New York closing at $57.61. Now that the OPEC+ efforts to force up oil prices are out of the way for another nine months, attention is focusing on US shale oil production, the slowing global economy, the US-China trade dispute, and the increasingly serious effects of climate change.

After a week of rampant speculation about what could happen at the G20 summit that would affect oil prices, the announcement on Saturday that the US and China have agreed to keep the current tariffs in place for now and would resume trade negotiations left the situation about where it has been for months. President Putin announced that Russia and its friends would join Saudi Arabia in extending the OPEC production cut for another six to nine months eliminating the drama from the formal OPEC+ meeting that will take place early this week. Oil prices were up a bit for the week settling at $64.74 in London and $58.47 in New York.