Yesterday's "bullish" slump in inventories (and record demand) was offset by a resurgence in US crude production and along with Russia's lack of enthusiasm for more production cuts, is weighing heavily on oil prices this morning
Today's rig count data will be a key catalyst for signals that US shale production growth may be topping.
“The market’s trying to pin it on the production increase but that seems overstated,” says Warren Patterson, commodity strategist at ING. “There was some strong [Brent] resistance at $50 and since the failure there it seems to have been one way”
“The market did get a bit ahead of itself before the numbers so we are seeing some correction as a result of that”
As Bloomberg Intelligence's Philipp Chladek notes, Russia and Kazakhstan's rejection of further oil production cuts that could be proposed by OPEC will hurt crude prices in 2H.
Russia, with the lion's share, is leading a group of 11 non-OPEC nations committed to reduce output by 558,000 barrels per day. But Russian compliance has been weak thus far. That's also true of Kazakhstan, which started its multi-billion dollar 370,000 barrel Kashagan field. Non-OPEC cuts are voluntary and OPEC doesn't have a mechanism in place to prevent any breach.
Additionally WSJ is now reporting that OPEC is mulling production caps for Libya and Nigeria, the market is unimpressed for now.