Key question for oil traders: How will collapse in U.S. rig count translate into shale production cuts?
The number of U.S. oil rigs is falling at an unprecedented pace, but that doesn’t mean production will fall at the same rate. Producers halt less efficient wells first, pushing up productivity — a process known in the industry as “high grading." WTI Crude is $34.13; Brent is $36.56.
There was no repeat of April’s price plunge below zero when the West Texas Intermediate contract rolled over, with the June futures trading at a premium to July before they expired, suggesting concerns the U.S. would run out of storage have eased. WTI Crude is $32.67; Brent is $35.50.
Tuesday marks the expiry of the June West Texas Intermediate futures contract. Prices plunged at the end of the May contract’s trading period, and oil has since staged a stellar recovery as producers embarked on deeper-than-expected output cuts. WTI Crude is $32.39; Brent is $34.91.
Producers are significantly throttling back output and, with demand increasing, the market is on a slow path toward recovery, say analysts. WTI Crude is $32.01; Brent is $34.39
In a sign that output cuts are starting to take hold, critical gauges of market strength are rallying. The price difference between Brent’s two nearest contracts has reached their narrowest in almost two months, signaling the oversupply is reducing. WTI Crude is $26.18; Brent is $30.16.
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