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One of Rigzone’s regular market watchers takes a look at the latest U.S. Energy Information Administration (EIA) U.S. crude stockpile figures and Saudi Arabia’s oil production cuts, and outlines what developments he’ll be on the lookout for next week. Read on for more detail.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Barani Krishnan, Senior Commodities Analyst at uk.Investing.com: The EIA finally announced a meaningful decline in U.S. crude stockpiles, citing a 17 million barrel drop for the week ended July 28 – apparently its largest in history – to justify all that talk of aggressive Saudi production cuts. For weeks, the Energy Information Administration, the custodian of U.S. energy data, had been reporting paltry changes to crude balances, creating doubts about whether the Saudis were really cutting an additional 1.0 million barrels per day, aside from other reductions, as they claimed.
To be fair, no one should expect a barrel for barrel correlation between changes in Saudi crude exports and U.S. inventories. But the EIA, as provider of the world’s most transparent and comprehensive data on energy, had to be capturing the shifts in the global supply situation at least in its weekly data. It’s good that such a huge decline was reported, as it shows that all that bull talk of production cuts wasn’t just ‘bull’.
Rigzone: What were some market surprises?
Krishnan: To add to its strategy of constantly introducing ‘shock and awe’ to the market and swing prices to its favor, Saudi Arabia announced this week that it would extend its July-August production cut of one million barrels per day to September as well.
That announcement interestingly came a day after a two percent price slump that cut short the five-week rally in oil. As though stung, and maybe somewhat annoyed, that short sellers were making a comeback, an official at the Saudi energy ministry was quoted saying by the kingdom’s state news agency SPA that the cuts would not only be extended but also deepened if necessary.
Rigzone: What developments/trends will you be on the lookout for next week?
Krishnan: More Saudi ‘bull’.
To contact the author, email andreas.exarheas@rigzone.com
