Russia Exemplifies Sign of Times in Oil Market

In this instalment of Rigzone’s review of oil market hits and misses from the past week, panellists comment on the direction of a crude oil pricing benchmark and the ranking of one of the world’s top oil producers. Read on for details.

Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?

Andrew Goldstein, President, Atlas Commodities LLC: As expected, crude oil, distillates and gasoline inventories all fell according to the latest US

Energy Information Administration (EIA) report. Surprisingly, the West Texas Intermediate (WTI) delivery point of Cushing, Oklahoma, rose 1.3 million barrels. WTI is still range-bound as it has traded in a US$1.70 range over the past two weeks.

Tom McNulty, Houston-based Principal and Energy Practice leader with Valuescope, Inc: Most of our clients wanted crude to trade up this week but really expected it to trade down, as it has.

Rigzone: What were some market surprises?

Goldstein: Not a huge surprise, but we’re seeing a continued breakdown of the US oil industry. Even with the previous cuts implemented by OPEC+, WTI is 32 percent lower than the start of the year.

Numerous bankruptcies, starting with shale drillers (Mizuho estimates that up to 70 percent of US shale producers may go bankrupt) and working its way to oilfield service providers have decimated the industry at a faster rate than we’ve seen in years.

More recently, offshore rig providers have joined the list – with Noble Corporation, Diamond Offshore Drilling, Inc and Valaris this week.

McNulty: I was surprised that Russia moved to the Number Two spot for oil production, after the US and before Saudi Arabia, based on June data.

If anything, it supports the notion that cash flow is king at these price levels.

Source: Rigzone