Oil rose for a third straight session on Monday, as speculators took advantage of last week's drop to seven-month lows, although a relentless increase in U.S. supply and little evidence of a widespread drop in global inventories capped gains. Investors in U.S. crude futures and options have increased their bets against a further rise in prices, just as the number of U.S. oil rigs in operation hit its highest in over three years. U.S. shale oil output is up around 10% since last year, and together with increases from the likes of Brazil, threatens to scupper the efforts of the Organization of the Petroleum Exporting Countries and its partners to force a drawdown in global oil inventories via production cuts. Brent crude futures were up 48 cents at $46.02 per barrel. The price is still on track for a near 20% drop in the first half of the year, having hit a trough of $44.35 on June 21, its lowest since November. U.S. West Texas Intermediate crude futures were up 47 cents at $43.48 per barrel. OPEC and 11 rival exporters agreed in May to extend a 1.8-million-barrels-per-day (bpd) cut in output to March 2018, in the hope that it will force global supply and demand to align. However, the market expects there was little fundamental news to justify more of a bounce in oil prices.
.png)
Brent crude half-yearly price performance; (Source: Thomson Reuters)
U.S. drillers add oil rigs for record 23rd week in a row
U.S. energy firms added oil rigs for a record 23rd week in a row, extending a year-long drilling recovery as producers boost spending on expectations crude prices will rise in future months despite this week's decline to a 10-month low. Drillers added 11 oil rigs in the week to June 23, bringing the total count to 758, the most since April 2015. That is more than double the same week a year ago when there were only 330 active oil rigs. Drillers have added rigs in 52 of the past 56 weeks since the start of June 2016. After agreeing in December to cut production by around 1.8 million barrels per day (bpd) from January-June, OPEC and other producers in late May agreed to extend those cuts for another nine months through the end of March 2018. However, the street assumes those OPEC-led cuts were being frustrated by rising output from U.S. shale drillers and other producers hoping to capture higher oil prices in future months. Futures for the balance of 2017 were trading just over $43 a barrel, while calendar 2018 was fetching about $45 a barrel. Analysts estimate crude prices are likely to remain under pressure until there are signs the number of rigs drilling for oil in the United States is stabilizing or declining. U.S. producers are expected to increase output to 9.3 million bpd in 2017 and a record 10.0 million bpd in 2018 from 8.9 million bpd in 2016, according to federal projections. The breakeven price for drilling new wells in the United States varies considerably among shale formations and even between various parts of the same play. But most analysts say producers need U.S. crude prices of $45-$50, while consultancy Rystad Energy (specializes in exploration and production), supposed wellhead break-evens average around $38 per barrel for the Bakken shale wells completed in 2016-2017.
.jpg)
Source: Thomson Reuters
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.