Oil Market Report

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Oil prices declined Monday morning, in-line with a wider sell-off, fuelled by expectations of rising inflation in the US as wages grew the fastest in the last 8.5 years. A renewed increase in US oil rig counts also mounted on crude benchmarks. By 08.55 AM GMT Brent crude had declined by 0.96% to trade at $67.92/bbl, following a 2.75% drop last week. At the same time WTI had lost 0.98% to trade at $64.81/bbl, albeit the north American benchmark performed better last week, declining by a mere 0.17% as draws in refined product stocks offset the effect of crude oil inventory gains.

Rigs drilling for oil in the US increased by six units last week, following the addition of 12 units the week prior. The fleet of active rigs currently stands at 765, compared to 583 a year ago. Rising drilling activity has lifted US crude above 10 million bpd, according to recent EIA monthly data. Unconventional production is on course to average at 6.55 million bpd in February, more than 110,000 bpd m-o-m.

Speculators hit the brakes last week, maintaining their net position in the US almost flat at 496 million bbls. With crude prices likely exhausting the available room for further gains, money managers kept a rather neutral position last week, anticipating new indicators for price direction.

Conversely, producers deepened their net long position by 10.22 million bbls, an outcome of an increase in shorts by 5.62 million bbls, while trimming longs by 4.6 million bbls. As crude prices may face challenges in rising significantly higher in the short-term, producers may start opting for hedges that will lock prices for their future production.

The Oil Research Team
Supply Chain & Commodities Research

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