Now this wasn’t the outcome many economists, analysts, oil producers or traders expected for the six months to June, especially after the rise in prices in 2016 and the renewal of the production cap by OPEC countries and Russia in May.
Global prices jumped 45% in 2016 and even though there was some weakness in the early months of this year, the renewal of the cap and its extension to March 2018 was widely expected to steady prices and then help them higher.
But nothing of the sort happened. Since hitting $US54.18 in mid-April, US crude futures have backtracked alarmingly and ended the June half on Friday at $US46.33 a barrel (in after hours trading) – which was up sharply from just over $US43 a barrel at the start of the week.
US production has jumped by more than 620,000 barrels a day in the past year, and the number of drilling rigs is up by more than 500 (and over 150 this year so far) (last week was the first fall in 24 weeks).
Even though US oil stocks have been falling now for the best part of three months (they edged up by 100,000 barrels last week, an inconsequential rise) to 509 million barrels, they at was still higher than the 456 million a year ago.
August WTI crude futures rose $US1.11, or 2.5%, to settle at $US46.04 a barrel. Prices lost 9% for the quarter and and 14.3% for the first half of the year, according to FactSet. They ended down 4.7% for June, but up 7% last week.
In London August Brent crude futures (which expired at the day’s close of trading), rose 50 cents, or 1.1%, to $US47.92 a barrel. The new front-month contract of September settled at $US48.77, up $1.14, or 2.4%.
Year to date, Brent shed lost 16%, but up 7% for last week. It was down 2.6% for June and nearly 10% for the June quarter.
Helping boost sentiment on Friday was the small fall in the number of active oil drilling rigs at work in the US.
Baker Hughes, the oil field services company, said its count of oil rigs dropped by two this week to 756.
But the fall was not of any consequence and rig numbers in the most active areas of Texas and North Dakota rose or remained unchanged.
The total number of rigs eased by 1 to 940 in the last week of June (there was a sharp rise of 19 in Canada though).That 940 was 509 rigs above the level at the end of June 2016.
