Market Report & Analysis for 11/21/17 Morning Edition
Morning Market Overview
| Oil prices ended the week in rally mode after gaining support from the shut- down of the Keystone Pipeline due to a 5,000 bbl spill in South Dakota. Keystone moves around 590,000 bpd of Canadian crude oil to the US. The leak has been contained and will remain shut until it gets approval for restart from the US Pipeline and Hazardous Material Safety Administration. Depending on the length of time the line is down the impact will be seen directly in Cushing inventory levels as the line feeds directly to Cushing. Cushing stocks declined last week (pre-pipeline spill) but remain above the highest level hit over the last five years. The loss of oil flow into Cushing comes at a time when Cushing stocks are well above normal for this time of the year. That said the loss of oil flow will contribute to US total oil stocks continuing to destock as they have been for months.
With the critical OPEC meeting now less than two weeks away the 30 second news snippets are hitting the media airwaves daily. On Friday Dow Jones reported the Saudi Oil Minister reiterated his country’s commitment to the deal saying further production cuts are needed to continue rebalancing the market. Nothing new as the market has been pricing in the accord being extended through next year. The risk to oil is there is no announcement by the group at the Nov 30 meeting to extend the accord. In the latest Baker Hughes report issued on Friday showed the number of rigs deployed to the oil sector increased modestly on the week and for only the fourth weekly gain out of the last eleven weeks. Even with a gain this week it still appears that the number of rigs deployed to the oil sector have topped out for the short term. The US upstream sector has been a major issue for OPEC and the participants in the OPEC production cutting accord. Drilling rigs deployed to the US oil sector increased by 9 rigs or a 1.2 percent for the week. Total rigs deployed to the oil sector are still higher by 286 or 63.3 percent year over year. |
