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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.
Until last Thursday, the oil markets largely ignored the increasing tensions between the US and Iran, including the attacks on six oil tankers near the Strait of Hormuz. Then Iran downed an unmanned US surveillance drone, and oil prices soared on the possibility that a war which could potentially halt the 18 million b/d of oil exports was imminent. After a day of vacillation, Washington backed off a retaliatory attack on Iran, allowing the situation to cool. By week’s end US crude was up 10 percent closing at $57.43 in New York and $65.20, or about 5 percent, in London.
Brent futures dropped steadily for the first three days last week, falling to a low below $60 on Wednesday before the attack on two oil tankers just south of the Straits of Hormuz. Prices then rebounded to close the week at $62.01. New York futures performed similarly, closing out the week at $52.51. Many observers commented on the relatively mild market reaction to the tanker attacks. Considering that a third of the world’s seaborne exports (some 18 million b/d) pass through the straits, many expected to see prices move much higher. The US and the Saudis already are saying that Iran was responsible for the attacks, while Tehran denies any involvement.
US oil prices sank into bear market territory on Wednesday, falling more than 20 percent below the April peak. Traders were concerned that a 6.8-million-barrel build in US crude stocks indicated lower prices ahead. The markets rebounded on Thursday and Friday on news that a settlement in the Mexican border dispute was in the offing and that the OPEC+ production cut was likely to be extended for six months. London futures closed at $63.29 and New York at $53.99. London, however, is trading about $10 below where it was in the middle of May. As has been the case for months, the markets are caught between sagging economic growth, which would hurt demand, and production outages in Venezuela, Iran, and potentially in Libya.
Oil prices fell on Friday posting their biggest monthly drop in six months, after President Donald Trump threatened tariffs on imports from Mexico. Unless the Mexican government stops people from illegally crossing into the US, he would impose a 5 percent tariff on imports starting on June 10th that would increase monthly, up to 25 percent on Oct. 1. Following the threat Brent crude futures fell $2.38, or 3.6 percent, to settle at $64.49 a barrel and New York futures fell $3.09 to $53.50 a barrel, a 5.5 percent loss. Brent touched a session low of $64.37 a barrel, lowest since March 8. WTI hit $53.41 a barrel, weakest since Feb. 14. During May Brent futures posted an 11 percent slide and WTI 1 percent, their largest monthly losses since November.
