Oil Gains Ground As Saudi Aramco Sees Improving DemandOil trades near $42 as Saudi Aramco states that Chinese demand for diesel and gasoline has almost reached pre-coronavirus levels.
Oil Video 10.08.20.
The Number Of U.S. Rigs Drilling For Oil Continues To Decline
The recent Baker Hughes Rig Count report indicated that the number of active drilling rigs in the U.S. declined by 4 to 247. The decline was driven entirely by the decline in the number of rigs drilling for oil, which fell from 180 to 176.
The most recent EIA Weekly Petroleum Status Report has shown that U.S. domestic oil production has declined from 11.1 million barrels per day (bpd) to 11 million bpd.
A continued decline in the number of U.S. rigs drilling for oil may put additional pressure on the U.S. domestic oil production. In case it falls below 11 million bpd, the decline in crude inventories will likely intensify, providing additional support to oil prices.
The most recent data points are clearly bullish for oil. U.S. oil production failed to gain momentum above 11 million bpd, crude inventories have started to decline while the number of rigs drilling for oil hit a new low.
However, WTI oil still lacks momentum as fears about the negative impact of the coronavirus pandemic hurt the near-term oil price upside potential.
Saudi Aramco Believes That Demand For Oil Will Continue To Rebound
While traders are cautious about making bullish bets on oil at higher prices, the world’s leading oil producer, Saudi Aramco, is optimistic on demand recovery.
Saudi Aramco has recently reported its second-quarter results. Unlike its peers like BP or Royal Dutch Shell, Saudi Aramco decided to maintain its dividend level as the firm believes that the global demand for oil is recovering.
Saudi Aramco noted that demand for diesel and gasoline in China has almost recovered to pre-coronavirus levels and stated that other markets were also showing signs of life.
These comments provided additional support to the oil market. Many traders are worried that coronavirus has dealt a long-lasting blow to oil demand, so Saudi Aramco’s comments are reassuring.
It remains to be seen what catalysts will be sufficient enough to push WTI oil beyond the recent highs at $43.50.
I maintain my opinion that such a move would be impossible without a material decline in inventory levels. Traders will have a chance to take a look at fresh inventory data on Tuesday, when API Crude Oil Stock Change report is set to be released.
For a look at all of today’s economic events, check out our economic calendar.