WTI crude ended down $1.09/bbl yesterday, settling at $35.70/bbl, its lowest point in the past month. Crude is under tons of pressure over the last 3 to 4 days due to some comments made late last week: Saudi Arabia’s deputy crown prince said that the Kingdom is essentially unwilling to be a swing producer on its own anymore, and would only agree to production cuts if Iran and other major producers agreed to do the same. Deputy crown prince…has a nice ring to it. You can thank him for being a paramount factor in the market falling over the past several days.
With that driving the market, one thing is for certain. This quarter will be a precarious one, considering the market has shifted in alternate directions as a result of quotes from our dear ole friends in OPEC, along with some from non-OPEC producers. To add to the current commotion, we have 2 meetings to focus on. On Sunday, April 17, a combination of over 12 OPEC and non-OPEC countries are set to meet in Doha to discuss the freeze and the second meeting will be on Thursday, June 2, when OPEC is holding its regular twice a year, full ministerial meeting in Vienna to review the state of the market.
Paddling back across the pond to the states, U.S. production has slowed, according to active oil rig counts from oilfield services firm Baker Hughes, which dropped another 10 last week, to a total of 362 (down 802 active rigs the same week last year). Those cuts in oil rigs aren’t putting much of a scratch on the surface of the global oversupply, because U.S. crude stocks are still building. U.S. production back this time last year, was 9.366 mbpd. Current U.S. production is sitting around 9.022 mbpd, which is a drop of only 4% despite losing 800+ rigs. This is a sign that we have higher efficiency at the current rigs we are utilizing.
If we are seeing volatility now, wait until the meetings actually take place. They could cook up a recipe for extreme price swings either way.