There was some hope that the worldwide oil glut would be reduced as U.S. oil producers started to pull out of wells because of unfavorable margins. However, Russia has recently decided to ramp its oil production up to an all time high to take advantage of the weak ruble. As a result, speculators have reduced their net-long position bet on WTI crude by 9.1%, a seemingly dismal prediction. U.S. crude output is down 514,000 barrels a day to a low since an output high in June. Similarly, the number of rigs in the U.S. dropped to a 5 year low. Normally this would reduce the worldwide glut, but since Russia is pumping out more oil than it has in the past 20 years it is counteracting U.S. cutbacks. The U.S. currently has 100 million more barrels than its 5 year average in oil. The fact that Russia is pumping out oil is going to keep prices low and most likely spill over into other goods. This will more than likely help keep inflation low in the U.S., something that will deter the Fed from an interest rate hike.
Source: http://www.bloomberg.com/news/articles/2015-10-02/oil-bulls-lose-faith-in-recovery-as-russia-adds-to-global-glut
2 comments:
Of course Russia decides to increase its oil production! Now that they're having air strikes against ISIS, Putin wants to assert dominance over the US, especially Obama. It's always a competition with Putin, and this latest one will only make it harder for the US to fully return to an economic power.
Actually there are signs that there could be an increase in oil prices and Russia could play a key part in that. They have a meeting with Venezuelan officials on the 21st to discuss how they might battle rising oil prices and one of the potential solutions so as to cut Oil supply so as to counteract falling demand. In the Us however there lies there is great focus being paid on the fed and whether they raise interest rates because if they do, oil companies will have a higher time financing their projects in the US thereby decreasing production and actually RAISING prices.
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