The oil market remains in a watch and wonder mode as the focus remains not on the impact of the OPEC production cut, but on the rising number of US oil rigs in use and higher production (and stockpiles) in the world’s biggest economy and third biggest oil producer.
Data from services group, Baker Hughes on Friday showed that US drillers added oil rigs for the fifth consecutive week taking the number of active oil rigs to 597 – up nearly 45% from a year ago and the highest since October 2015.
It was only six extra in the week ended February 17, but it lifted the number of oil rigs drillers have brought to 72 so far this year in response to the stabilisation in crude prices.
On top of that the US Energy information Administration reported midweek that US oil stocks hit their highest ever in the week ending February 12 – 518.1 million barrels, up 9.5 million barrels on the week.
And US oil production continues to hover just under the 9 million barrels a day level at 8.977 million barrels. A move over and well beyond the 9 million mark could trigger a sell off in oil by nervy investors worried about the impact of rising US production.
US production averaged 8.7 million barrels a day in 2014 and 9.4 million in 2016 and fell to 8.9 million a day last year and is forecast to average just over 9 million this year if current trends continue.
All this saw oil weaker on Friday and the week.
March West Texas Intermediate futures, eased 0.3% to $US53.18 a barrel, while in London, April Brent crude slid 0.1% to $US55.58 a barrel.
For the week, WTI futures prices ended about 0.9% lower, which was their first weekly decline in three weeks, according to FactSet.
Brent crude lost about 1.6%. Monday is a holiday, Presidents Day, for US financial markets.
Gold prices ended with a loss on Friday, but again managed to eke out a small weekly gain as a weaker dollar, uncertainty in Europe, Asia and the political volatility of President Trump kept investors interested in the metal.
“The cocktail of [recent] dollar weakness and ongoing Trump developments encouraged bullish investors to pounce,” Lukman Otunuga, research analyst at FXTM in new York told Marketwatch.com.
Gold “remains bullish in the short term amid the rising political risks across the globe and could edge higher towards $1,250 if the revived [U.S. Federal Reserve] uncertainty bolsters the yellow metal’s attraction further,” he added.
Comex April gold fell $US2.50, or 0.2%, to settle at $US1,239.10 an ounce, after another three month high on Thursday (it hit one the previous Thursday as well).
For the week, prices finished roughly 0.3% higher in what was gold’s third straight weekly (thought modest) gain. Comex silver futures prices fell on the day after they hit another three month high on Thursday.
March silver fell 4.4 cents, or 0.2%, to $US18.03 an ounce, and about 0.5% higher for the week.
And Comex March copper fell 1.2 cents, or 0.4%, to $US2.707 a pound, for a weekly loss of 2.2%.
Investors lost their enthusiasm from the week before about the impact of the strike at the Escondida mine in Chile (owned by BHP) and continuing production hitches at the Grasberg mine in Indonesia. On the weekend Freeport-McMoran declared force majeure on copper concentrate shipments from its Grasberg mine in Papua joining BHP to declare force majeure on its contracts.
Reuters reported that Freeport, which has been negotiating with the Indonesian government after halting exports due to new mining rules, said on Friday it could not meet contractual obligations for copper concentrate shipments from the giant mine following a five-week export stoppage. All work has stopped at the world’s second largest copper mine.
Reuters said Grasberg was expected to produce 800,000 tonnes of copper in 2017, or around 3.5% of global supply, according to Jefferies analyst Chris LaFemina.
It and Escondida account for around 10% of global supply.
