Oil Price Fundamental Daily Forecast – Combination of US, OPEC+ Production Restraints Fueling Rally
U.S. West Texas Intermediate and international-benchmark Brent crude oil prices are positive late Friday after testing a two-year high earlier in the session. The move is being fueled by a number of factors including expectations of increased global demand, OPEC+’s decision to hold production levels steady, the lack of progress in negotiations between the United States and Iran, and government and private industry reports of a greater-than-expected draw in U.S. crude oil stockpiles.
Most of the important fundamentals are bullish, however, there are some concerns over the slow pace of global vaccinations, API and EIA gasoline inventory builds and the possibility of a surprise deal between the U.S. and Iran.
Any of these potentially negative events could encourage profit-taking or position-trimming, but I don’t think we’ll see a major change in trend. Some of the weaker bulls will use the news as an excuse to get out of their long positions. Most bullish traders agree that these are short-term factors that should eventually be offset by long-term demand advances.
US Oil & Gas Rig Count Falls for First Time in Six Weeks – Baker Hughes
U.S. energy firms this week cut the number of oil and natural gas rigs operating for the first time in six weeks as growth in drilling slows despite crude prices hitting their highest since 2018.
The U.S. oil and gas rig count, an early indicator of future output, fell by one to 456 in the week to June 4, according to data on Friday from energy services firm Baker Hughes Co.
Despite this week’s decline, the total rig count was up 172 rigs, or 61%, over this time last year. It was also up 87% since falling to a record low of 244 in August 2020, according to Baker Hughes data going back to 1940.
U.S. oil rigs were steady at 359 this week, after rising for four weeks in a row.
US Shale Restraint Pushes Oil Prices to Multi-year High: John Kemp, Reuters
John Kemp from Reuters wrote on Friday that crude oil prices have climbed to their highest level for more than two years as U.S. shale producers have added only a limited number of extra rigs and production, opting to push for higher prices and profits instead.
In the current phase of the cycle, prices are rising mostly because of the declining responsiveness of the shale sector, rather than official production restraint from OPEC and its allies in the wider OPEC+ exporters group.