US Oil Drill Rig Count Surges

With prices still trending above $50.00 per barrel, US oil producers are using the opportunity to restore shuttered production as evidenced by the latest rig count data available from oil services giant Baker Hughes.  According to the weekly rig figure, producers added 29 rigs last week, marking the largest advance in the figure since April of 2013.  The gains in the number of active drill rigs is likely to be accompanied by rising output over the coming weeks and months as exploration and production companies use the futures market to hedge production costs for the foreseeable future.

Meanwhile, despite OPEC’s progress in reaching its output cut goals, Venezuela and Iraq have yet to hit desired quotas.  Although there has not been a penalty levied on these producers, it does highlight ongoing delays in reaching targets. After gaining ground Friday, WTI for March delivery is under pressure, trending back below $53.00.

Despite highlighting concerns about tepid inflation during last week’s interest rate decision, policymakers are relieved to a degree by the most recent annualized figures which showed both core and headline consumer prices continuing to rise.  Core CPI jumped from 1.50% to 1.60% while the non-core figure rose to 1.50% from 1.20% reported during November.  Nevertheless, annualized optimism gave way to a more pessimistic short-term view.

On a monthly basis, both the core and headline consumer price indices contracted by -0.30% and -0.20% respectively.  Although it represented a narrowing of the losses compared to a month earlier, it still underscores the difficulty facing policymakers as they work to restore inflation and growth to the economy.  Despite the approaching negotiations regarding the North American Free Trade Agreement, the Canadian dollar is back on the climb as the dollar selloff sends peers higher.