Oil prices might have had a good week, but American companies continue to chase productivity with another cut to active rig numbers last week.
It’s a trend that has dominated production in the world’s biggest producer for the past couple of years, but has become very noticeable in 2024.
Last week saw the number of oil rigs in the US drop by three to 485, according to data from energy services company Baker Hughes.
That was down from 488 the week before and 500 at the end of 2023, while the number of gas rigs was unchanged at 98.
Miscellaneous rigs rose by one to five. A year earlier, the US had 546 oil, 130 gas, and six miscellaneous rigs in operation, Baker Hughes said on Friday.
Overall, 588 rigs were operating in the US last week, down from 682 a year earlier.
That had no impact on prices, which were down ahead of the release of the rig data in the late afternoon.
A fall in US stocks the week before of 2.5 million barrels to 457.1 million was slightly lower than the 2.8 million barrel drawdown forecast.
US West Texas Intermediate crude fell 0.9% to $80.59 per barrel, while Brent was down at $84.18. For the week, WTI was up 2.7%, and Brent was up 1.8%.
With a week to go in the first half of 2024, WTI is up 13%, and Brent is up 9.2%.
"Crude oil reached a seven-week high after a US report showed declines in crude and fuel stocks, as the expected summer deficits amid strong demand are starting to show. US implied demand for gasoline reached last year's level, while jet fuel demand has reached a five-year high," Saxo Bank noted in a report on Friday.
However, there are expectations that prices may not have much further to climb over the summer, even as supply remains light amid 2.2 million barrels per day of voluntary OPEC+ production cuts continuing through the third quarter.
"We think that peak summer demand risks falling short of providing a meaningful catalyst to shock prices higher. Looking at last year (which saw a similar, albeit more mild, physical market soft patch after spring turnarounds), it wasn't until Saudi exports dropped by more than a million barrels per day from the start of the summer and the very peak of seasonal demand that prices were able to inflect meaningfully higher.
"Fast-forward to today, we think the current fundamental setup into summer puts such an inflection point out of reach," Brian Leisen, global oil strategist at RBC Capital Markets, predicted.
