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Inside, confidential and off the record


Oil on a bearishly note

CRUDE OIL PRICES HAVE RISEN MARGINALLY since yesterday, with Brent rising a bit more once again than has WTI, but perhaps most importantly even as prices have risen the contangos have widened. That is, the averaged front month one year contango for both Brent and WTI has widened to $5.50 from $4.96 yesterday and from $4.17 one week ago this morning. Crude is once again being a good deal more aggressive in “bidding for storage” when and where it can be found and this is the signal of a bearishly inclined market, not one that is bullishly inclined.

The drill rig count continues to founder, having fallen by another 15 rigs as there are now only 372 rigs at work drilling for oil in the US. The total rig count, including those rigs working to find natural gas has fallen to 464 and it is worth remembering that it was only two years ago that this was just above 2,000.

However, we should also try to keep things in perspective, for although the rig count seems to have fallen precipitously in the cour se of the past two years, it pales when compared to the far more precipitous and thus far more serious collapse that took place back in the early 80's. Back then, the num ber of rigs working in the US in both the crude oil and nat-gas fields at its peak was... are you ready for this?... 4,500; 2.5 x's as many as were at work at the recent peak.

Or perhaps we should consider what has happened to the total number of rigs at work around the world. At its recent peak two years ago there were approximately 3,700 rigs working and that's fallen to approximately 2,600 now. But back in '81 at the real peak there were approximately 6,200 rigs drilling for crude and/or nat-gas around the world, and that fell to 1,100 at the '99 trough:

May WTI up 12 39.46-51
Jun WTI up 21 40.63-68
JlyWTI up 23 41.41-46
AugWTI up 21 41.98-03
MayBrent up 27 40.44-49
JunBrent up 24 41.03-08
JulyBrent up 25 41.44-49
AugBrent up 25 41.85-90
OPEC Basket: $36.19 03/23


ISSUES.... 03/ 28 / 2016 - Send Us Your Issues

ISSUES.... Inside, confidential and off the record
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