So much for global warming! Winter is back and back with a frosty reminder that it can still get cold. Really cold. The first real blast of winter in a very long time and the market is trying to get a feel for how that may impact supply. Natural gas, that has been held back by record natural gas production, will finally get a test. The mantra that it can’t get cold enough to turn this market around will be put to the test. If this arctic blast hangs in we could see some of the biggest withdrawals that we have seen in years, even with U.S. production near some records.
Heating fuels are going to be supported as well. Gas oil in Europe is on the rise. Europe has its own Arctic cold blast and that is driving prices. Heating oil prices in the U.S. are flat. The key now is how long the cold temperatures will stay around. This may determine how the market might be impacted. It looks like the cold is going to settle in across much of the nation and the demand for heating fuels.
Reuters reported that U.S. energy companies kept the oil rig count unchanged this week, General Electric Co’s Baker Hughes energy services firm said on Friday, even though crude prices hovered near their highest level since the summer of 2015.
The rig count, an early indicator of future output, held at 747 in the week to Dec. 22, still much higher than a year ago when only 523 rigs were active after energy companies boosted spending plans for 2017 as crude started recovering from a two-year price crash.
The increase in U.S. drilling lasted 14 months before stalling in August, September and October as some producers trimmed their 2017 spending plans after prices turned softer over the summer. Energy firms started adding rigs again in November as crude prices rose.
Yet, is the stalling of rig counts because of the holiday or a sign that U.S. shale oil producers are starting to get smart and pay attention to the well head economics. Will we hit $60 WTI before the end of the year? The countdown begins!
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