(+) US Oil Weekly Update: Bearish Fundamentals Prior to OPEC Meeting

After a strong closing on Friday last week above $70 per barrel for WTI, the benchmark crude slid below the $70 mark Monday afternoon. The escalation fears in Ukraine and in the Middle East were overshadowed by next years oversupply concerns. The price decline in the beginning of the week signals that the market is not expecting supply disruption after UK`s latest sanctions against the Russian shadow fleet. [caption id="attachment_141562" align="alignright" width="253"] WTI Future Contracts: Tightly Backwardated Contracts[/caption] Deflating tension in the Mideast as Israel approved a 60-day cease-fire deal with Iran- backed Hezbollah in Lebanon. The US-mediated talks could help calm the region and deescalate the devastating conflict.

A narrow trading range for oil prices ahead of the December 1 OPEC+ meeting with market analysts expecting OPEC+ to delay releasing of additional barrels amidst a cocktail of external factors and bearish outlook on fundamentals.

Figure 1: Bearish Outlook Drag Down Crude Oil Prices. [caption id="attachment_141569" align="aligncenter" width="1024"] Chart: West Texas Intermediate (Investornytt/GE Briefings) Trykk på bildet for større versjon![/caption] US Crude inventories and production US commercial crude oil inventories decreased by 1.84 million barrels in the week ending November 22, with market forecasters predictions at 1.1 million barrels decrease in crude stocks. U.S. crude oil inventories are about 5 percent below the five-year average for this time of year and 21.3 million barrels lower than a year ago. U.S. crude oil refinery inputs averaged 16.29 million barrels per day during the week ending November 15, 2024, which was 60 Kbpd less than the previous week`s average. Refineries operated at 90.5 percent of their operable capacity last week.

Figure 2: US Crude Stocks including SPR at 818.8 million Barrels [caption id="attachment_141564" align="aligncenter" width="1024"] Source: U.S Energy Information Administration Trykk på bildet for større versjon![/caption] Figure 3: US Crude Stocks Excluding SPR at 428.4 million Barrels [caption id="attachment_141563" align="aligncenter" width="1024"] Source: U.S Energy Information Administration Trykk på bildet for større versjon![/caption] US Rig Activity The total number of active rigs operating in the US according to Baker Hughes rig count decreased by one last week, now at 583. Oil focused rigs increased by one last week, now at 479 rigs. Gas focused rigs decreased by two, now at 99 active rigs. Miscellaneous rigs remained flat at five active rigs.

Figure 4: Active Oil Focused Rigs Increased From 478 to 479 [caption id="attachment_141566" align="aligncenter" width="1024"] Source: Baker Hughes Trykk på bildet for større versjon![/caption] Figure 5: Gas Focused Rigs declined from 101 to 99 Active Rigs [caption id="attachment_141565" align="aligncenter" width="1024"] Source: Baker Hughes Trykk på bildet for større versjon![/caption] Figure 5: Total Active Rigs in the U.S. Decreased by One at 583 [caption id="attachment_141568" align="aligncenter" width="1024"] Source: Baker Hughes Trykk på bildet for større versjon![/caption] Figure 6: Rig Count in Major Basins [caption id="attachment_141567" align="aligncenter" width="1024"] Source: Baker Hughes Trykk på bildet for større versjon![/caption] Baker Hughes has issued the rotary rig counts as a service to the petroleum industry since 1944, when Baker Hughes Tool Company began weekly counts of U.S. and Canadian drilling activity. Baker Hughes initiated the monthly international rig count in 1975. The North American rig count is released weekly at noon Central Time on the last day of the work week.

By the Numbers November 27, 2024

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