Drilling slowdown in USA may push oil price up

Posted 04 February, 2019

Brent oil prices were on the rise last week posting the strengthening for the fourth week but still failed to break the $63/bbl handle. This level has been scaring off buyers since the beginning of the year.

During the week, the oil market followed different trends, though it mostly saw positive signals, like advancements in China-US trade negotiations, sanctions against Venezuela’s energy sector, slower than expected increase in US stocks along with a weaker dollar amid more flexible Fed approach, strong labour market data and a solid US manufacturing PMI.

Meanwhile, by week's end, Baker Hughes reported a decrease in the number of active drilling rigs to 746 (15 units down). Thus, the figure has been the lowest level since the second half of May 2018. The number of drilling rigs declined for the fourth time over the last five weeks, indicating a further slowdown in oil production in the USA.

The US Treasury Department said that not only Venezuelan oil supplies to the USA, but also all transactions involving the US financial system are subject to sanctions, lending additional support to oil tags.

In short run, the market players are likely to keep studying the potential impact of US sanctions on the supply-demand balance, the sentiment of global investors in the stock markets as well as the future dynamics of US oil and petroleum prices. In particular, the $63 handle will be in the spotlight, as its break can lead to further resistance near the $64 handle.

Previous forecast

04 February, 2019 18:14

← Euro shies away from slackening euro-area figures

The euro has posted some weakening at the start of the week. According to the daily statistics, the euro-to-US dollar exchange rate stands below $1.1450 at some $1.1433, with no short term upward sentiments to be seen. In the current situation, the euro is on the spot, as it refrains from accepting already notable slackening in the region and still expects ECB's upward rate revision. As a result, the currency can eventually face so-called accumulated impact, which may entail much bigger damage. The upward attempts of the euro-to-US dollar rate are limited at the 1.15 handle, while the break of 1.14 is getting more real.

Euro shies away from slackening euro-area figures

Next forecast

31 January, 2019 15:58

Japanese yen gains grounds in second half of week →

The Japanese yen is actively getting stronger vs the US dollar. By now the US dollar to yen exchange rate stands at 108.70. The Japanese economic reports are now not in the spotlight now, though some figures should be mentioned. If the industrial sector is ready to recover, this means there are signs of positive improvements of the domestic demand.

Japanese yen gains grounds in second half of week
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