Crude oil prices rise on Friday after two days of retreat, as the US retail data helped curb fears of an impending recession in the world’s largest economy.
The futures on US crude oil WTI rose by 1.23% to 55.14 USD per barrel after falling on Wednesday and Thursday by 1.4% and 3.3%, respectively. The Brent variety registered a price increase of 1.17% to 58.91 USD per barrel after wiping out 2.1% of its value on Thursday and another 3% on Wednesday.
The retail sales in the US rose by 0.7% in July, with consumers buying a wide range of goods, despite shrinking car sales. The data was released one day after the US yield curve first reversed in 2007 and triggered sales on the stock market and oil. The inverted yield curve is historically regarded as a reliable signal of a coming recession. Overall, US data is a small light in the darkness.
Earlier in the week, it became clear that China’s industrial production growth had slowed to more than 17-year lows, with Germany’s economy contracting in the second quarter.
Brent’s price is still 10% higher than the beginning of the year thanks to restrictions on supplies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia. In July, OPEC+ agreed to extend production restrictions until March 2020 to support prices.
A Saudi Arabian spokesman signaled in early August that further steps could be taken, saying “the country has committed to doing its best to keep the market balanced next year”.
The US shale production continues to rise, although the Permian slowdown is underway. The most recent round of quarterly earnings from shale drillers showed widespread financial stress, cutbacks, operational challenges and investor wariness. Typically, extensive financial and operational problems would be a bullish sign for oil, since it would suggest shale was destined to undershoot expectations, but the mounting problems have not helped crude at all. The last few downturns in oil prices came as US shale was adding massive volumes of new supply. During those periods, demand was still growing at a strong rate; it’s just that US supply was growing even faster.
US oil inventories and production
The US crude oil inventories increased during the week ending August 9, the US Energy Information Administration (EIA) said in a report.
According to the Weekly Petroleum Status Report, The US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, increased by 1.6 million barrels from the previous week. At 440.5 million barrels, US crude oil inventories were about 3% above the five-year average for this time of year.
According to the EIA, total motor gasoline inventories decreased by 1.4 million barrels last week and were about 4% above the five-year average for this time of year. Finished gasoline and blending components inventories both decreased last week.
Distillate fuel inventories decreased by 1.9 million barrels last week and were about 3% below the five-year average for this time of year.
Propane/propylene inventories increased by 3.2 million barrels last week and were about 9% above the five-year average for this time of year. Total commercial petroleum inventories increased last week by 2.4 million barrels last week.
Oil rig count
The US oil and natural gas rig count fell this week to a low not seen since May 2017 as activity dropped or stalled in all the country’s major basins. A total of 1,007 rigs were working in US basins, down by 15 week-on-week. The last time the rig count was lower was in the first week of May 2017 at 995.
This week’s tumble in the rig count was almost all in the oil sector, which plummeted 16 to 796, while the natural gas rig count dropped by one to 205. A two-rig increase was seen in rigs not specified as oil or gas.
This most recent reporting period is the first time the oil rig count has been below 800 since the first week of 2018.
The Permian Basin of West Texas and eastern New Mexico posted the week’s biggest single rig loss of seven rigs, leaving 430 – all of which are oil-directed. Another big oil play, the Williston Basin of North Dakota and Montana, remained the same week over week with 57 rigs, while the Denver-Julesburg Basin mainly in Colorado unloaded two oil rigs to leave 28 operating.