The Falcons soared over the Pack, the Patriots pummeled the Steelers, and it looks like the Bears have the upper hand against the Bulls. WTI crude is currently trading down $0.63 at $52.59 with refined products following suit; RBOB down $0.0081 and ULSD down $0.0157. Even with the weakening of the U.S. dollar, and although positive news came from OPEC/non-OPEC members in regards to their output cut compliance, the Baker Hughes data clearly seems to be the driving force pushing the market lower this morning.
In a meeting on Sunday with OPEC and non-OPEC producers, it was made clear that roughly 1.5 million barrels per day have been taken out of the world’s global crude output. This represents upwards of 80% of the 1.8 million barrels per day target set for the first half of 2017. Saudi Arabia, Kuwait, and a few other countries have actually cut more than required of them, and several nations have even reached their required cuts faster than originally expected, such as Russia. Unfortunately though, the increased in U.S. output is casting a shadow over these cuts.
The drilling recovery here in the U.S. is alive in well. Last week Baker Hughes rig count report showed an addition of 35 total rigs, with 29 of them being oil. That represents the largest rig count increase in roughly 4 years and has even led the EIA to raise its 2017 output forecast from 8.78 million bbls/day to 9 million. The increase in drilling productivity in the U.S. has clearly countered the decrease in global supply.
Domestically, this increase has been welcomed with open arms. When crude fell from over $100/bbl to under $30/bbl, most, if not all, oil and fracking companies laid off workers, slowed down or completely stopped development and exploration, and showed significant losses on their P/L sheets. However, in the final quarter of 2016 U.S. drillers increased the numbers of rigs by approximately 19% and have continued that trend here into 2017. According to Bloomberg.com Companies such as Halliburton Co., the world’s largest provider of fracking services, and Schlumberger Ltd., the world’s largest oilfield services provider, have drastically reduced their net losses and now hope to even turn a profit per share sometime this year. Things are looking up domestically, but internationally… issues linger.