The Taliban Retakes Afghanistan
August 16, 2021
The IEA report from last week was a bit negative on demand but there continues to be a supply deficit. The market is trying to determine if the new cases of COVID-19 will impact energy demand enough to ease the supply concerns or if demand remains strong and the tightness of supplies continues.
The Baker Hughes US Rig Count Report on Friday said oil rigs were up 10 to a total of 397 rigs. This is a big jump and oil rigs are now at 225 more than last year at this time. Despite this jump in the rigs count the outlook has been that US oil producers will continue to slowly bring back more production as they try to practice some disciple to reinsure investors. This is the higher number of rings in 16 months.
The University of Michigan’s consumer confidence sentiment index fell dramatically to a reading of just 70.2 in its preliminary August report. This was a drop of 13% from July and the lowest monthly reading since 2011 which appears to be driven by the rise of COVID-19 delta variant cases and hospitalizations with some cities and states reinstating restrictions and mandates.
Reuters reports that China’s teapot refineries have cut their crude throughput in the last month due to new quotas, lower margins, and high inventories. China’s daily crude processing in July fell to the lowest level since May 2020.
One of China’s busiest shipping ports has been forced to close after a coronavirus case was found. This is not good news for getting the supply chain back in order.
It appears the Taliban has quickly taken control of the country, Afghanistan. Their leaders marched into the capital yesterday and were promising to declare a new Islamic Emirate of Afghanistan. The concern for the market is the uncertainty this creates now in the Middle East. The world and the markets wonder what these new leaders will do next.