Crude oil trading is volatile on Friday amid growing tensions in the Middle East, which raises fears of supply disruptions. However, the two major oil varieties are about to send the week with about 3% growth.
The futures on US crude oil WTI appreciated by 0.02% to 62.88 USD per barrel, while the Brent variety reported a price drop of 0.15% to 72.51 USD per barrel.
The military coalition led by Saudi Arabia attacked the Hussite-controlled capital of Yemen Sanaa. The attack was taken two days after rebels took responsibility for strikes with unmanned aircraft that shut down a key oil pipeline in neighboring Saudi Arabia.
Earlier this week, the US evacuated its employees from the Embassy in Baghdad, while Donald Trump ordered sending aircraft carrier, B-52 fighters, and missiles to the Middle East. When tensions are so high, even a tactical mistake by Iran could ignite the Middle East. Currently, there are many risks to the crude oil supply and prices can test highs reached in April.
Still, Donald Trump has told his advisers that he does not want the US to engage in a war with Iran.
The situation was further exacerbated by sabotage in the Gulf region. In Saudi Arabia, one of the country’s key oil pipelines was struck by drones on Tuesday – probably by Yemeni rebels, backed by Iran. The weekend saw sabotages of oil tankers in neighboring United Arab Emirates (UAE).
According to sources from the government, two pipeline pumping stations were attacked during the incident in Saudi Arabia. Seven unmanned drones have carried out attacks on important targets in Saudi Arabia. Meanwhile, Saudi Aramco has announced that it has rectified the attacked places.
The market is also awaiting a decision by the Organization of Petroleum Exporting Countries (OPEC) and other manufacturers whether they will continue with supply cuts, which have already raised prices by over 30% this year.
At a meeting of OPEC in Saudi Arabia, this weekend will assess the Member States’ commitment to a reduction in oil production agreement.
Crude oil inventories
The US crude oil inventories for the week ended May 10, excluding the Strategic Petroleum Reserve, increased by 5.4 million barrels from the previous week, according to data from the US Energy Information Administration.
At 472 million barrels, US crude oil inventories are 2% above the 5-year average for this time of year, the report indicated.
The US crude oil refinery inputs averaged 16.7 million barrels per day during the week ending May 10, 2019, which was 271,000 barrels per day more than the previous week’s average. Refineries operated at 90.5% of their operable capacity last week. Gasoline production decreased last week, averaging 9.9 million barrels per day. Distillate fuel production increased last week, averaging 5.3 million barrels per day.
The US crude oil imports averaged 7.6 million barrels per day last week, up by 919,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 7.2 million barrels per day, 9.6% less than the same four-week period last year.
Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 752,000 barrels per day, and distillate fuel imports averaged 41,000 barrels per day.
US oil and gas rig count falls
The US oil and natural gas rig count fell by six to 1,065 in the week ending Wednesday, according to the latest data from S&P Global Platts Analytics, as nationwide totals continued the steady decrease seen during the past six months.
Oil-specific rigs accounted for the drop, falling by 14 to 838, while gas-driven rigs rose by six to 224. An increase of two was registered for rigs not specified for oil or gas.
The total US rig count the same week a year ago was 1,117. The oil and gas rig count averaged 1,071 in the prior week, and 1,084 the week before.
The domestic rig count reached 1,223 in mid-November 2018 but has gradually slipped since, although there have been some periodic weekly gains.
The biggest week-on-week movement was the Permian Basin of West Texas and southeastern New Mexico, which decreased by five rigs to 457. Next was the Williston Basin of North Dakota and Montana, down three rigs to 59.