Morning Market Overview
Oil prices were pummeled in a holiday trading week in the US. Last week the market completely ignored all talk of an OPEC production cut and focused simply on the growing glut of oil in global inventories. With the OPEC meeting just two weeks away the market is going to have to be convinced that any cut (if there is one announced) will be large enough to arrest the global inventory building pattern and push inventories back to the five-year average or lower in a reasonable period of time.
With oil prices trading at the lowest level in over a year OPEC has a huge challenge to overcome in the coming weeks. With the market now pricing in a global economic slowdown based on the way equities have been trading OPEC could see demand growth slowing on top of the ongoing growth in supply from places like the US.
Last week the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector decreased by 3 rigs on the week after increasing during the previous week. Total rigs deployed to the oil sector are higher by 138 or 18.5 percent year over year. Total US crude oil production is about 21.1 percent above where it was for the same week a year ago. This week’s production came in at 11.7 million bpd.