Number of Drilling Rigs Dips for Tenth Straight Month
September 30, 2019
Crude oil and refined product prices fell on Friday mainly driven by news that Saudi Arabia is attempting to impose a cease-fire in Yemen, Saudi Arabia production back near 100% pre-attack levels, the US Dollar near a 2-year high, the US considering investor limits into China, and Iran’s President claiming that the US offered to lift sanction to resume negotiations
The Baker Hughes Rig Count Report showed that the number of rigs looking for oil were down 6 to a total of 713 compared to last year at this time when rigs were at 863. This is the 10 consecutive month that rigs have declined and total rigs at 713 is the lowest total since May 2017.
The benchmark freight rate for VLCC’s in the Middle East to Asia jumped by as much as 28% on Friday following in the wake of the United States imposing sanctions on two Chinese shippers earlier in the week. This increase could increase the shipping cost per ship by $600,000. Shipping sources said up to 50 tankers could be affected by the sanctions.
S&P said that while geopolitical risks remain high in the Middle East, it was maintaining its stable outlook on Saudi Arabia as it expects that Saudi Arabian oil production facilities that were attacked earlier this month will be swiftly repaired.
Saudi Arabia Crown Prince Mohammed Bin Salman said on a 60 Minutes interview that a war between Saudi Arabia and Iran would lead to a total collapse of the global economy. He also so said that a political and peaceful solution is much better than a military one.
The IEA warned on Friday that it may be forced to cut its growth estimates for global oil demand for 2019 and 2020 should the global economy weaken further. In August the IEA reduced its global demand growth estimates from 2019 and 2020 by 1.1 and 1.3 million bpd respectively. The revised demand growth would be at the slowest pace since the financial crisis of 2008.
The Bureau of Economic Analysis (BEA) reported on Friday that the 3rd and final estimate for the US Q2 GDP came in at 2%. This was mainly due to higher consumer spending.