For the 11th week in a row, the number of US oil rigs rose (up 10 to 662 - the highest since September 2015). US Crude production continues to track the lagged rig count, pouring more cold water on OPEC's production cut party.
The rig count grows, tracking the lagged oil price in a self-defeating cycle...
And crude production appears to have plenty more room to run...
And don't forget, as Nick Cunningham detailed, there are thousands of drilled shale wells are sitting idle, unfracked and uncompleted.
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Once the DUCs are completed, new production will come online. And just as before, that backlog still weighs on the market. Wood Mackenzie estimates that if the Permian Basin’s DUC list was completed, it would add 300,000 bpd in new supply.That supply sitting on the sidelines will put downward pressure on any new oil price rally.
And worse still, as OilPrice.com's Tsvetana Paraskova, it seems the Saudis are starting to panic at the loss of market share... Abundant supply of light oil in Asia and weaker demand amid some seasonal refinery maintenance will likely prompt Saudi Arabia to cut the official selling price for most of its crude varieties bound for Asia in May.
At the beginning of March, Saudi Arabia unexpectedly lowered the April price for the light crude it sells to Asia. According to trade sources who spoke to Reuters, Saudi Arabia’s official selling price (OSP) for Arab Light was set for April at the low end of the range expected by a Reuters survey. At that time, the price for Arab Extra Light was cut by $0.75, which was more than expected.
For the May OSP, according to a Reuters survey of four Asian refiners, Saudi Arabia would likely cut the price of its Arab Light crude by $0.10-$0.40 per barrel from the April OSP.
“I’m seeing price reductions across the board,” one of the refiners surveyed told Reuters.
The Arab Light and Arab Extra Light grades prices are expected to drop more than the medium and heavy grades, since the Asian market is oversupplied mostly with light oil varieties, according to the sources Reuters has polled.
OPEC’s output cuts have made it profitable for oil traders to send crude from as far as the U.S., the North Sea and West Africa to Asia, and this has weakened demand for spot market purchases from Middle Eastern grades.
Another respondent in the Reuters survey for May prices said:
“The spot market is weak. Almost every type of crude is sold at discount against its OSP.”
Saudi Arabia releases OSPs for its grades around the fifth of each month, and as a policy Saudi Aramco does not comment on the monthly prices that Saudi Arabia is setting. The Saudi OSPs generally establish the trend for the prices that Iran, Kuwait, and Iraq charge for Asia-bound crude.