Oil’s State of Confusion

March 14, 2022

UPDATE:

As I’ve reported recently, oil drillers have been reluctant to raise production even with prices breaking thru $100/barrel, due to fresh memories of bloody price collapses in 2014 and 2020. In an even more uncertain environment, oil companies have been much more comfortable just rewarding long suffering stock holders (and themselves) with stock buy backs and the like.
But, money is money, and as prices crept over $130/ barrel, some drillers were tiptoeing back.

This morning the schizophrenic market yanked their chain again.
What this means for gas prices is probably nothing in the short term, but I defer to experts far above my pay grade.

Houston Chronicle:

The state’s rig count jumped by double digits as energy companies responded to soaring prices and pleas from federal leaders to increase production. 

The number of drilling rigs operating nationally climbed by 13 to 663 this week, according to oil field services company Baker Hughes. Most of the production growth came from Texas, which added 12 rigs.

Energy companies have added 261 rigs nationally over the past year, a 62 percent increase from 402 during the same week in 2021.

Both market signals and world leaders have been calling on the industry to ramp up production. Oil’s U.S. benchmark settled at $109.33 a barrel Friday, up 3 percent.

MSN:

US oil prices briefly tumbled below $100 a barrel on Monday, unwinding a significant chunk of the recent spike caused by Russia’s invasion of Ukraine.

Oil plunged more than 8%, touching a low of $99.76 a barrel. That means oil has lost almost roughly quarter of its value since touching a near 14-year high of $130.50 a barrel on March 6. 

It’s the first time oil has traded below $100 since March 1.

“This is one hell of a correction,” said Tom Kloza, global head of energy analysis at the Oil Price Information Analysis.

The selloff should ease fears of an energy-driven recession in the United States and, if sustained, should bring some relief to drivers dealing with record gasoline prices

Brent crude, the world benchmark, dropped more than 7% to $104.35 a barrel in recent trading. That marks a sharp pullback from the recent peak of nearly $140 a barrel.

Traders blamed Monday’s losses on concerns about Covid-19 lockdowns in China and hopes for progress in negotiations between Russia and Ukraine.

“You’re seeing some vicious selling,” said Matt Smith, lead oil analyst of the Americas at Kpler.

Despite the recent selling, oil remains up by more than 30% on the year.

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