U.S. Rig Count Hits 2009 Low
May 11, 2020
The Baker Hughes Rig Count was down 33 oil rigs with the total oil rigs down to 292 rigs. Last year at this time the US had 805 crude oil rigs online. Crude oil rigs have fallen by a total of 391 rigs over the past 8 weeks. The US now has the lowest rig county since September 2009. The production number has been trending lower and production has fallen quicker than expected due to the very low crude prices.
The market has shifted its focus to the return of demand as some US States start to lift the shutdowns and many go back to work.
Some oil analysts are anticipating US crude production to be down by 1.7 million bpd by June of this year. Currently, US oil production is down by 1.2 million bpd from the start of 2020.
OPEC+ cuts that began May 1 of 9.7 million bpd have gone into effect and that is offering the market some support as well. There are concerns that some countries will not cut as much as promised. Iraq for example has not informed regular customers of oil cuts to its export, which suggest it will not fully comply. If some of the OPEC + group do not comply then other may do the same so the compliance levels will be watched going forward.
CME Group said it is expanding its list of energy products for which it will support negative prices. Starting on May 10th, CME said it will extend negative strikes to July for underlying futures contracts including Brent crude oil average price, Brent crude oil, WTI average price and Light Sweet crude oil options and RBOB gasoline and average price options.
A report that just came out this morning that Saudi Arabia would cut an additional 1 million barrels per day and the market jumped about a dollar higher on the news. This has not been confirmed but multiple sources now say that Saudi Arabia asked Saudi Aramco to cut May production if at all possible, by an additional 1 million bpd. This shows that traders/computers are ready to jump on any bullish news. Optimism is still high as the economy starts to reopen. But there are still concerns about a second wave of the virus as things reopen but we will just have to see how things go as time moves forward. There are still others that are not so optimistic like Federal Reserve Bank of Minneapolis President, Neal Kashkari who predicted that the worst is yet come for the US economy.
The speculators are willing to take on more risk on the bullish side of crude oil as hedge funds boosted their net-bullish wagers on WTI to the highest level in a year in the week ending May 5th, according to the CFTC’s commitment of trader’s report released on Friday.