Crude oil prices have endured at multi-year lows since the weekly reopening, widely attributed to the prospect of rising production globally in spite of softening demand. Oil prices fell spectacularly after Baker Hughes, one of the world’s largest oil field services companies, reported that US drillers added 17 oil rigs in the week ending December 18th. The rapid increase in rigs marked the second largest gain in more than a year with the number of US oil drilling rigs representing potential output for the industry. Compared to a year ago, the amount of active rigs have fallen by nearly two-thirds, from 1536 to the current 541. However, the drop in rigs and production has not been enough to ease global oversupply conditions. Recent rig additions could worsen the glut and pricing outlook further. Brent oil recorded lows not seen in 11-years. February Brent crude fell to $36.06 a barrel on Monday with the comparably light sweet crude contract for February delivery trades near $35.52 a barrel.
Despite low crude oil pricing, the rise in rigs is an indication that suggests producers are committed to maintain their production levels. The US Energy Information Administration recorded a massive rise in US crude stockpiles in the latest reading, as resilient production has seen inventories surge to 490.70 million barrels, levels not seen in the last 80 years. US oil production held at 9.33 million barrels per day in September, the same as August, according to the latest Department of Energy figures. Russian production has surpassed 10.00 million barrels per day, the highest level of output since the collapse of the Soviet Union while production from the Organization of the Petroleum Exporting Countries remains near record levels above 31.50 million barrels per day. With the global surplus not showing any signs of slowing, most market participants are anticipating a price drop to as low as $20-$25 a barrel in the coming months. All eyes will be trained on EIA inventory data due Wednesday as excess onshore storage runs out of spare capacity.
Oil Touches New Cycle Lows
Market Trends - 21/12/2015