The headlines are all talking about supply and demand; specifically, oil supply and its impact on the price of oil. As of the posting of this, WTI Crude is sitting at $58.07 per barrel and Brent crude is at $67.85 per barrel, according to Bloomberg Energy, and it has folks wondering where oil prices will go from here in light of oil inventories rising. In fact, Oil & Gas 360 just released an article yesterday entitled, Rough Day for Oil: Crude Plunge Approaches 6% discussing the plunge in oil prices in detail.
The recent headlines include:
- CNBC: Oil
Sinks 2.7% as US Crude Stockpiles Surge, Demand Worries Flare
- The Wall Street Journal: U.S.
Oil Prices Fall Ahead of Inventory Report
Surprise Oil Inventory Build Presses Down WTI
- The Wall Street Journal: Oil
Drops Sharply as Glut Fears Return
- Bloomberg Opinion:
U.S. Fills In on Oil Where OPEC Refuses to Go – An Incipient Glut Leads
By way of a reminder, at the end
of last year, a “glut” is reported to have helped contribute to the fact that
oil prices took a significant tumble to that $45 per barrel mark, that we all
would like to forget happened.
So is another “glut” on the horizon?
Let’s focus on North Dakota for now:
The North Dakota Industrial
Commission (“NDIC”) released its most recent Director’s Cut on May 15, 2019,
which can be found here. North Dakota oil production reportedly
bounced up approximately 54,500 barrels of oil per day from February 2019 to
March 2019. In addition, the number of
producing wells reportedly
increased by nearly 200 wells from February 2019 to March 2019, edging close to
the all-time high number of producing wells which was 15,409 in January 2019.
However, the North Dakota rig
count is reportedly
down 70% from the high; the rig count as of May 15, 2019 was 65 and the
all-time rig count was 218 from 5/29/2012.
Cut also reports that drilling permit activity has returned to normal,
operators continue to maintain a permit inventory that will accommodate varying
oil prices for the next 12 months.
Now let’s look at big picture data:
According to the U.S. Energy
Information Administration (“EIA”), crude oil inventories have risen –
according to EIA data highlights, which can be found here, crude oil inventories as of May 17, 2019
are at 476.8 million barrels, an increase of 4.7 million barrels from a week
earlier, and an increase of 38.6 million barrels from one year earlier. This
increase was reportedly larger than expected, according to the article
Extends Slide to Weekly Lows Near $61 After EIA Report.
It is no secret that supply has increased, so the question remains as to whether supply has increased to the extent that it will cause a glut. The upcoming OPEC meeting in June and many other factors may help us in determining where we sit on the supply front. Stay tuned!