European Lockdowns Create Market Concerns
November 22, 2021
The Baker Hughes Rig Count said that oil rigs were up 7 to a total of 461 rigs. This put oil rigs at their highest total since April 2020.
The news that Japan and the US might make a joint release from their oil reserves this week has the market still cautious and trading flat this morning. This type of event would bring prices down in the near term and look good for the headlines. But most experts agree that longer-term this is a bullish factor for the market. I would also caution that traditionally this week of Thanksgiving brings a smaller volume of trades and traders as the week wears on and can lead to exaggerated moves in either direction because only a few trades can have a big impact.
The market is also still concerned about new COVID-19 lockdowns in Europe that could create demand destruction. A possible reduction in demand along with news of a release of barrels from reserve could give the market a larger pullback.
OPEC compliance for their agreed output quotas was at 116% in October, up from 115% in September. Some analysts think that this is a sign that a few producers are struggling to meet their agreed production quotas. If this is the case, then OPEC could decide to cut back more production in response to a global reserve release.
It appears that the hedge funds’ bullish outlook on the US dollar has eased a bit as the funds decrease their long positions. This is on the thought that the dollar has risen too much in comparison to the pace of fiscal tightening. The dollar moves in an opposite correlation to commodity prices, especially crude oil.