

Commodity Update; Crude Oil – 18 May 2015
Brent crude and WTI hold ground above $60 level as inventories drop and rig count falls further
Since our last update Brent and WTI crude have continued their ascent as inventory drawdown quickened in North America while the rig count has also fallen further.
According to Baker Hughes data the number of Shale oil rigs in North America has now fallen by 973 since last May, leaving the total number of operating rigs in the region at just 888.Commercial crude oil inventories also fell by 2.2 million during the last week which, although a lesser decline than in the previous period, still suggests a heavy rate of drawdown.
The May 13 inventories reading was the first report to suggest a net contraction in stockpiles since early January 2015. While this by no means suggests that the oil rout is over, it does provide us with an indication that the supply and demand imbalance in crude markets is beginning to right.
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Looking ahead
Looking ahead there are a number of factors that will determine the near to medium term direction of oil prices. Most notably, the EIA in the US believes that overall global supply is still excessive when considering the prospects for demand growth in the near future.
Although the current excess could begin to dissipate with an eventual upturn in global growth, there still remains a wild card in the global oil price equation. This is as with a nuclear deal having been concluded between Iran and the P6 group of nations it is possible that sanctions against the Gulf producer will soon be lifted.
Given that any lifting of sanctions against Iran is likely to result in the nation’s oil coming back onto world markets, it is also possible that global supply will once again begin to increase in 2015 regardless of any further changes in the North American rig count.
This could pose a problem for those hoping to see the crude oil recovery continue and as such, we will watch closely in the coming weeks to see a) if there is further progress in custom essays cementing the nuclear agreement with Iran, b) if the current trajectory of the rig count holds steady rate and c) whether the present pace of inventory drawdown can be maintained in the US.
Brent/WTI Crude / 8 Hour Intervals
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