The earnings reports from U.S. oil shale producers are painting a very uniform picture so far: Production was up in the second quarter; capital spending budgets will be reduced for the remainder of 2017; and despite those capital spending cuts production is expected to continue to rise.
U.S. crude benchmark West Texas Intermediate dropped back to $49.24 today, down 93 cents a barrel or 1.85%–on reports that OPEC production climbed in July despite new promises and a major effort to curb production. West Texas Intermediate had  briefly risen to above the psychologically important $50 a barrel level today
Yesterday’s report from the U.S. Energy Information Administration followed up on the surprisingly good news on July 25 on U.S. crude inventories from the American Petroleum Institute. The numbers from the American Petroleum Institute showed a much bigger than expected draw down of 10.23 million barrels in U.S. oil inventories
U.S. benchmark West Texas Intermediate closed up 4.21% to $48.25 a barrel today, July 25. International benchmark Brent climbed 3.93% to $50.51 a barrel. Big moves. Exactly what you’d expect on a day when both OPEC and U.S. shale producers produced big news.
Today, July 6, the market has been of two minds (at least.) West Texas Intermediate climbed in the morning to $46.47 a barrel on news that the American Petroleum Institute was forecasting higher demand and a bigger than expected draw down in U.S. inventories. But the afternoon session saw West Texas Intermediate drop back to $45.30 on news that U.S. production had climbed again.
Hedge funds and other money managers have cut their long positions on crude futures to the lowest level since November for the week ended on June 20. At the same time short positions, which are bets that oil prices will fall further,  have climbed to near record highs. The ratio of long positions to short positions has fallen to around 2-to-1 from a high of 12-to-1 in February. This all suggests that we’re at something like a short-term bottom in the price of oil.
A month ago when OPEC extended its production cuts to to the end of 2017, Saudi Arabia promised to do “whatever it takes” to stabilize oil prices? Now it’s not at all clear what the Saudi’s can do.The dual problem is rising production from countries outside the OPEC agreement and rising U.S. production.
