According to BBH, crude oil’s correction is not over yet and the price might extend to around $60/barrel.
Key Quotes
“While we are not convinced a significant low is in place, technical considerations suggest the correction is not over either. We envision another 10% rally that would lift the March crude oil futures contract to around $60.”
“Output has not been cut. Nor has demand meaningfully increased, and inventories are still rising.”
“Baker-Hughes reports another 83 oil rigs were shut down, leaving 1140. The rig count peaked in October at 1609. Last week was the ninth consecutive week that rigs have been shuttered and 14 of the past 17.”
“While there are 30% fewer rigs, output remains near its peak at 9.2 mln barrels a day. Rigs are used to drill the well and are only tangentially related to output. However, the shale wells have a shorter life span, and the rig count speaks to the exploration and future production.”
“The decline in rigs appears to be concentrated among the less productive fields and vertical rigs. That said, through last week, horizontal rigs have fallen for eleven consecutive weeks.”
“Last week's loss of 80 horizontal rigs is the largest drop since 1991. It leaves 1088 still operating. Seasonal forces peak soon.”
“Meanwhile, the US refinery strike is expanding. This may boost oil inventories if the refinery shutdowns prevent the production of gasoline and distillates, like heating oil.”
Key Quotes
“While we are not convinced a significant low is in place, technical considerations suggest the correction is not over either. We envision another 10% rally that would lift the March crude oil futures contract to around $60.”
“Output has not been cut. Nor has demand meaningfully increased, and inventories are still rising.”
“Baker-Hughes reports another 83 oil rigs were shut down, leaving 1140. The rig count peaked in October at 1609. Last week was the ninth consecutive week that rigs have been shuttered and 14 of the past 17.”
“While there are 30% fewer rigs, output remains near its peak at 9.2 mln barrels a day. Rigs are used to drill the well and are only tangentially related to output. However, the shale wells have a shorter life span, and the rig count speaks to the exploration and future production.”
“The decline in rigs appears to be concentrated among the less productive fields and vertical rigs. That said, through last week, horizontal rigs have fallen for eleven consecutive weeks.”
“Last week's loss of 80 horizontal rigs is the largest drop since 1991. It leaves 1088 still operating. Seasonal forces peak soon.”
“Meanwhile, the US refinery strike is expanding. This may boost oil inventories if the refinery shutdowns prevent the production of gasoline and distillates, like heating oil.”
