Crude oil prices’ upward momentum in the wake of a higher oil rig count
- U.S. oil rig count is currently at 241; which is November's highest figure.
- U.S. oil inventories have declined by 0.754 million barrels against the forecasted +0.127 million barrels.
- Brent and WTI have soared past the $49 and $46 psychological price levels respectively.
Crude oil prices soared after the release of data on U.S. oil inventories and rig count. As at 18.31 GMT, WTI had risen by 0.76% to trade at $46.25. Brent was also on an upward momentum, trading at 49.02. The market was reacting to a decline in oil inventories and a higher rig count in the U.S.
U.S. crude oil inventories indicate a looming rise in demand
According to the data released by the Energy Information Administration, the U.S crude oil inventories for the past week have declined by 0.754 million barrels. Experts had forecasted that the amount in storage would increase by 0.127 million barrels. In the previous week, the inventories had increased by 0.768 million barrels.
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At the same time, the Cushing crude oil inventories reduced by 1.721 million barrels. In the prior week, the amount of stored crude oil at the Cushing increased by 1.2 million barrels. Analysts had predicted a decline of 0.92 million barrels in today’s press release.
Today’s data on U.S. oil inventories is good news for investors whose interest is to trade oil. The lower-than-expected figures are an indication of rising demand for crude oil. The market is looking past the rising coronavirus cases and banking on the positive vaccine news. Investors are hopeful that governments will ease international travel restrictions. Furthermore, people getting back to their offices will equate to a higher demand for car fuel.
If Pfizer Inc’s submission goes through on 10th November, vaccination within the U.S. will start on the next day. Moderna is also set to forward its application before the end of this month. The positive vaccine news has been heightened further by the announcement that the University of Oxford’s vaccine can be 90% effective with the modification of the dosage. Subsequently, the crude oil market is hopeful that the pre-pandemic norm will return.
U.S. records the highest oil rig count in November
According to the figures released by Baker Hughes, the oil rig count in the United States is currently at 241. The number is an increase from last week’s 231 rigs. Notably, the current oil rig count is November’s highest figure.
Data on the active drilling rigs is a sign that the crude oil market is overcoming the challenge of bankrupt oil companies. According to Haynes & Boone, 40 oil production firms have gone out of business as of October 2020. Noble Corp. and Chesapeake Energy Corp. are some of the oil-producing firms that have filed for Chapter 11 bankruptcy.
Oil explorers are striving to increase production to cash in on the expected demand. However, increased activity at the rigs may result in a hike in oil inventories. In the coming weeks, investors will keep an eye on how the demand and supply of crude oil play out, and the impact of these forces on crude oil prices.