Rig Count Totals Continue to Plummet
May 26, 2020
Rig counts continues to decline. The Baker Hughes report on showed a decline of 21 rigs from the prior week and a new total of 237 rigs. There were 797 rigs in operation at this time last year – a difference of 560 rigs. This is the lowest rig count since July 10, 2009.
The OPEC+ cuts began in May and Russia reports its production is close to its 8.5 million bpd quota. Russian Energy Minister Alexander Novak says supply and demand are coming into balance in the next couple of months. If OPEC+ adheres strictly to its production quotas and demand continues its comeback, supply could be balanced. This seems like a overly optimistic outlook, but the news is offering support to crude oil prices.
Chinese financial investors are betting on a rebound in oil prices as they fill up commercial storage in China. From late April to the end of June, it is estimated that 50 million barrels of oil valued at roughly $1.8 billion are expected to be pumped into a dozen delivery points managed by International Energy Exchange, according to a report by Bloomberg.
China last week failed to produce their normal annual economic growth forecast. This is the first time the target has not been met since 1990. Speculators think China will have an economic slowdown which would impact demand. Chinese Premier Li Keqiang said his country cannot set specific targets while facing unpredictable factors due to the pandemic.