Mercado Released [13 April 2015]: Global Oil prices in the spotlight
GLOBAL OIL PRICES IN THE SPOTLIGHT
The US oil rig count dropped by 42 to 760 last week, the largest drop in four weeks. America has lost more than half its oil rigs since October 2014 as the collapse in crude prices caused drillers to scale back. The rig count has dropped 53% since October 2014. We view the crude oil price to be steadying between US$55 to US$60 per barrel in the short to medium term. We also feel that the new efficiencies in the US oil output may make numbers of rigs misleading as producers are increasing the amount of oil they can extract from an individual well. The US is currently pumping 9.2 million barrels a day, the highest since 1972 despite fewest rigs operating in almost four years. The crude oil market is currently oversupplied by between 1 – 2 million barrels a day. Although most oil majors have reduced their spending on capital projects, the impact has yet not yet filtered through to output because of Libya and OPEC countries that have either increased or maintained their production so as not to lose their market share. Russia also has increased its production to reduce its losses resulting from low crude oil prices. Supply might also increase by around 1 million barrels per day if Iranian sanctions are lifted – adding to the global oil glut.
For more on the economy read this week’s NMG Mercado here