Rig Rout

Should all the oil rigs be forgotten and never bought to mind? The U.S. oil rig count rang out the old year with the first drop in U.S. oil rigs since 2016. So despite record U.S. oil and gas production, the rig count drop is signaling that we should start to see production plateau. Baker Hughes released its final rig count of the year and decade, and it ended on a cautionary note. They reported that total oil and gas rig count is down 26% from a year ago as the count came in at 278 rigs. Oil rigs fell by eight rigs week over week and gas rigs held steady at 125. While U.S. production is reportedly at 12.8 million barrels a day according to the Energy Information Administration (EIA) bankruptcies and investment retrenchment could signal a pullback in us production growth.

This, along with bullish EIA data and topping action in the U.S. dollar, not to mention a dash of geopolitical risk factors heating up over the weekend should lend support to oil as we get ready to close out this decade.

The EIA reported that Crude oil inventories decreased by 5.5 million barrels during the week ended Dec. 20, from the previous week, the weekly Energy Information Administration survey reveals. The drop more than the expectations of a 1.7-Million-barrel draw.U.S. crude oil inventories are only 2% above the five-year average for mid-December.

U.S. crude oil refinery runs averaged 17.0 million barrels per day during the week, up 419,000 barrels per day from the average for the week ended Dec. 13. Refineries operated at 93.3% of their operable capacity for the week of Dec. 20.

The Wall Street Journal reported that the “ U.S. carried out airstrikes against an Iranian-backed Shiite militia group in Iraq and Syria, in the Trump administration’s most forceful response to Tehran’s assertive posture in the region. The Pentagon said Sunday’s attack targeted three of the Kataib Hezbollah militia’s locations in Iraq and two in Syria, including weapons-storage and command facilities. Officials said the strikes came in response to an attack on Friday in which more than 30 rockets were fired at an Iraqi military base near Kirkuk, killing a U.S. contractor and wounding four U.S. troops.

A media official for Kataib Hezbollah said 25 of the group’s members had been killed and at least 20 wounded in the strikes along the Iraq-Syria border. An Iraqi Interior Ministry official put the death toll at 15 and added that a weapons-storage facility was set on fire. Among the dead was a commander known as Abu Ali al-Khazaali, the officials said. U.S. officials said Kataib Hezbollah is armed by Iran and has strong links to Tehran’s paramilitary Quds Force.

The set up for oil looks solid with gains expected through the end of the year. Oil Products should also get support as the markets adjust to the new IMO rules that start January 1st. Hedgers should be hedged. Besides, we are very optimistic about the global economy. The US economy is leading and that should continue to set the stage for above-average gl0bal oil demand growth.

Natural gas saw a bearish report, yet warm in the Midwest offset its impact. The EIA reported that the EIA reported Friday that domestic supplies of natural gas fell by 161 billion cubic feet for the week ending December 20. Analysts were looking for a drop of 150 to 153 bcf.