Oil Tries To Settle Back Above The $52 Level

Oil Video 18.01.21.

The Number Of U.S. Rigs Drilling For Oil Continues To Move Higher Together With The Price Of Oil

The recent Baker Hughes Rig Count Report indicated that the number of U.S. rigs drilling for oil increased by 12 to 287 as oil producers continued to add rigs in response to the latest developments on the oil price front.

Interestingly, U.S. domestic oil production remained unchanged at 11 million barrels per day (bpd) for several weeks despite the regular increase in the number of drilling rigs.

The stable level of the U.S. domestic oil production has provided significant support to the market and facilitated a decline in crude inventories.

This week, EIA will release its regular Weekly Petroleum Status Report on Friday, January 22, so traders will have to wait a few more days before they will have a chance to see whether the U.S. domestic oil production has started to increase. If oil production remains at current levels, oil may get a boost as inventories will likely continue to decline in this scenario.

Oil Will Likely Ignore The Recent Lockdowns In China Unless The Situation Gets Much Worse

Oil has recently corrected from multi-month highs as some traders used the latest lockdowns in China as an excuse to take some profits off the table after a major rally.

China has just reported that is fourth-quarter GDP grew by 6.5% year-over-year while Industrial Production increased by 7.3% in December, highlighting its role as the main driver of the current rebound in the world demand for oil.

Thus, traders will closely monitor the developments on the coronavirus front in China as additional lockdowns may hurt demand. At this point, China has imposed lockdowns on about 30 million people. While the number looks huge, it’s just a tiny fraction of China’s population of more than 1.4 billion so the situation is not serious from the demand point of view.

The current mood in the oil market remains bullish thanks to Saudi Arabia’s decision to cut oil production by 1 million bpd in February and March, and oil will likely need additional downside catalysts to move lower.

For a look at all of today’s economic events, check out our economic calendar.