Oil Gains Ground As China Is Set To Buy More U.S. Oil

Oil Video 17.08.20.

The Number Of U.S. Rigs Drilling For Oil Falls Again

The recent Baker Hughes Rig Count indicated that the number of active drilling rigs in the U.S. declined by 3 to 244. The number of U.S. rigs drilling for oil fell by 4 to 172.

A few weeks ago, the number of active oil rigs stood at 180 so the U.S. drilling is again under pressure.

This is a bullish development for the oil market. The latest EIA Weekly Petroleum Status Report indicated that U.S. domestic oil production declined from 11 million barrels per day (bpd) to 10.7 million bpd, a sign that current oil price levels were not sufficient enough to boost domestic oil production.

The continued decline in the number of active rigs should put additional pressure on the domestic oil production. In turn, lower domestic oil production should lead to lower inventory levels , providing support to the oil market.

The recent fundamental reports were bullish for oil but the negative impact of the coronavirus pandemic remains a key obstacle on oil’s way to higher levels.

It remains to be seen whether the current improvements on the inventory front and the recent decline in U.S. domestic oil production will be sufficient enough to push oil to new highs.

China Increases Purchases Of U.S. Oil

China is struggling to comply with the first phase of the trade deal with the U.S. and has reportedly increased its purchases of U.S. crude oil.

While this move is related to the implementation of the trade deal between U.S. and China, it also shows that China’s appetite for oil continues to grow.

Oil traders closely watch the developments in China since the country managed to contain the coronavirus pandemic and presents an opportunity to look at the potential trajectory of the oil demand rebound in other countries.

The current problem for the oil market is that many European countries have started to reimpose various virus containment measures which will inevitably put pressure on the demand for oil.

For a look at all of today’s economic events, check out our economic calendar.