Oil Mixed As Resistance At $43.50 Stays Strong

Oil Video 31.08.20.

The Number Of U.S. Rigs Drilling For Oil Declines To 180

The recent Baker Hughes Rig Count report showed that the number of active drilling rigs in the U.S. was unchanged at 254 while the number of rigs drilling for oil declined by 3 to 180.

The previous report indicated that the number of U.S. rigs drilling for oil increased by 11 to 183, so the new report shows a step back after the recent upside move.

The upcoming EIA Weekly Petroleum Status report will show that U.S. domestic oil production has declined due production shutdowns caused by Hurricane Laura, so market participants will likely ignore the near-term developments on the production front.

Before Laura became a problem for oil producers, U.S. domestic oil production increased from 10.7 million barrels per day (bpd) to 10.8 million bpd. This trend will likely continue once the industry fully re-starts after the hurricane as oil prices continue to move higher.

The pace of this upside move is slow but the upside trend remains intact which is important for those companies that are deciding whether to increase their production in the near term.

United Arab Emirates Provide Additional Support To Oil

Abu Dhabi National Oil Company (ADNOC) has told its clients that it would cut October supplies by as much as 30% as United Arab Emirates government directed it to stay in line with the OPEC+ production cut deal.

Previously, Saudi Arabia put pressure on those OPEC+ members that were producing above their quotas. However, UAE was never indicated as a significant laggard so the new move highlights OPEC+ desire to reach 100% compliance with the original production cut deal. Obviously, this is a bullish development for the oil market.

At the same time, there is also a bearish development. While the current challenges which include high inventory levels and serious damage to travel demand are well known, continued problems with coronavirus in India may put additional pressure on oil prices.

India, which is one of the world’s biggest oil consumers, has just registered a record number of new cases in one day. If the situation continues to worsen, India may have to implement additional virus containment measures which will put pressure on oil consumption.

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