Oil Price Crash – What Next?
In the fast moving oil market much of the fundamental data only becomes available for general consumption at least one month in arrears. But EIA oil price data and Baker Hughes rig counts are available weekly and with much action going on it is worthwhile updating.
The price plunge seems to have reversed, at least for the time being (more on that below). But the most stunning data is the free fall in US oil drilling rigs shown in Figure 1, down 553 (34%) from the October top. The IEA also published their Oil Market Report early this month, on 10th February, reporting oil supplies were down 235,000 bpd in January, mainly in OPEC countries Iraq and Libya.
Figure 1 The US oil rig count is down to 1056 rigs from a peak of 1609 in October last year. The gas rig count continues to inch downwards slowly. The collapse in US shale oil drilling, that looks set to continue, must lead to US oil production decline in the months ahead.
Figure 2 The bounce in the oil price is as sharp as the crash and is difficult to see at this scale. Hence, move on to Figure 3.
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