Market Report & Analysis for 10/23/2018 Morning Edition

Morning Market Overview

Oil prices staged a slight recovery on Friday (mostly short covering) but declined for the second week in a row. The market has shifted its attention to the current comfortable global supply and demand balances despite Iranian production steadily declining in anticipation of the onset of the US sanctions on Iran.

The Middle East remains unstable with a high level of uncertainty over the Saudi killing of reporter Khashoggi still garnering attention as to whether the US and the west will add sanctions on Saudi Arabia. Global oil balances are comfortable but any new unscheduled production shut-ins could move the bias back to the upside.

There are many geopolitical issues continuing to bubble up around the world any of which could result in short term logistics issues. Friday afternoon the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector increased by 4 rigs on the week after increasing during the previous week. Total rigs deployed to the oil sector are higher by 137 or 18.6 percent year over year.

Oil rigs increased with US crude oil production declining last week (pre-emptive shut-ins in Gulf ahead of Hurricane Michael). US crude oil production continues in an overall uptrend setting new production records on a weekly basis. Total US crude oil production is about 29.7 percent above where it was for the same week a year ago. This week’s production came in at 10.9 million bpd.