-US rig counts increase yet again
-We still have a political hangover from the Trump administration
Crude oil prices moved lower in the final trading session of the week on supply-side strains and a resurgent pandemic in Asia. A quiet week for commodities still left the price of oil supportive of drilling in the United States, however. We’re wondering, meanwhile, if the honeymoon period is over for President Biden; the Senate will receive the articles of impeachment against his predecessor on Monday.
The price for Brent crude oil, the global benchmark, was down by about 1.3% as of 2 p.m. ET. The global benchmark had a quiet week, trending higher so far by less than a percentage point.
Grappling with an uptick in new cases of COVID-19, the Chinese government this week took steps to limit the spread. Beijing on Friday issued a directive that suspends in-person training for sports activity. It also suspended some flights to limit the spread. While China’s early experience with the pandemic gave it something of an edge in the fight to contain the pandemic, its economy remains vulnerable. Almost any dip in economic activity in China would send crude oil prices lower.
On the supply side, oilfield services company Baker Hughes, which on Thursday gave the market a boost with a note of optimism about recovery in 2021, reported that U.S. drillers added oil and gas rigs for the ninth straight week. The latent period between deploying rigs and realizing production, which has a lag time of perhaps six months or so, suggests U.S. crude oil output would threaten efforts by members of the Organization of Petroleum Exporting Countries to balance the market through coordinated production cuts.
Elsewhere, Exxon Mobil lifted force majeure over Nigerian crude and Iran, anticipating some sanctions relief from the Biden administration, said it could reach pre-Trump levels within the first quarter of the year. Secondary sources reporting to OPEC economists put Iranian crude oil production at around 2 million barrels per day in December. It was producing nearly double that before the Trump administration hit the Islamic republic hard and repeatedly with economic sanctions.
Next week, we’re expecting the U.S. political fireworks to go off again when the Senate gets articles of impeachment against Trump. The former president was convicted in the House of Representatives for inciting an insurrection on Jan. 6, when his supporters broke into the federal Capitol building. The Trump hangover continues even as the former president works to transition into civilian life. Several of his supporters still in office, some of which are vocal supports of the QAnon conspiracy group, tried to bring guns into the Capitol building and a handful of others are facing ethics probes for their tacit support for the Jan. 6 rebellion.