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
- OilPrice.com: Another 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 Financial Commentary
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. The Director’s 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 entitled, WTI 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!