Crude oil prices opened weaker today following Wednesday’s release of U.S. oil inventory data that confirmed API’s estimate of a build.
Regardless of the fact that the build, at 3.8 million barrels as estimated by the EIA, followed several weeks of draws, it pushed prices lower in the last trading day before the July 4th weekend.
At the time of writing, Brent crude was trading at $68.62 per barrel and West Texas Intermediate was changing hands for $67.01 per barrel, both down from Wednesday’s close.
The trend could be reversed before too long, however, after the Dallas Fed confirmed the expected slowdown in drilling activity in the shale patch. In its latest quarterly report, the Fed said industry executives pointed to declines in both oil and gas production during the second quarter of the year, with the oil production index falling to -8.9 and the natural gas production index to -4.5, which represents a sharp reversal from moderate growth earlier this year.
The Dallas Fed also cited executives as saying they expected a lot less drilling going forward. Among the larger producers, with output of 10,000 bpd or more, 42% said they expected a significant decline in drilling activity, with many citing the Trump administration’s trade policies as a deterrent, and more specifically, the tariff push.
“It’s hard to imagine how much worse policies and D.C. rhetoric could have been for US E&P companies,” one respondent to the survey said. “We were promised by the administration a better environment for producers, but were delivered a world that has benefited OPEC to the detriment of our domestic industry.”
Meanwhile, a trade deal between the United States and Vietnam infused markets with a sense of certainty, according to Reuters, that could result in stronger oil demand, stimulating bullish sentiment among traders. The deal will see 20% tariffs imposed on Vietnamese exports to the U.S.
Credit: Oilprice.com
