Drilling Rig Counts Are on the Rise
April 5, 2021
Energy prices were up at the end of last week as the OPEC + meeting and positive economic reports continue to fuel buying. OPEC+ did agree to increase production, which was a surprise for the market, but the small gradual increases were ultimately seen as supportive to prices. OPEC+ will raise output by 350,000 bpd in May and June and by 441,000 bpd in July. Saudi Arabia will ease voluntary oil cuts by 250,000 bpd in May, 350,000 bpd in June and by 400,000 bpd in July.
The US ISM Manufacturing Index reported a reading of 64.7 on Thursday for March. A much higher level than the 61.8 reading expected and the highest monthly level in over 8 years.
Baker Hughes reported on Thursday of last week that 13 crude oil rigs came online in the US. US oil rigs have risen by 165 rigs since August 21, 2020.
On Friday, the nonfarm payrolls number was a big surprise with 916,000 new jobs in March. The unemployment rate dropped to 6% as businesses recover from the pandemic. Estimates for new jobs were pegged at 647,000, so the 900,000 plus came as a big shock.
Energy markets are down this morning, likely on some traders rebalancing positions and taking profits after the long holiday weekend. The market is also still digesting the OPEC+ increases. Also, there are reports that the US is in talks with Iran to renew the 2015 nuclear deal, which could mean more crude oil on the market. Iran has been pushing out more oil already despite still being under US sanctions. The increase in the rigs counts also has some traders more optimistic that US crude oil production could see an increase in the coming months.