Energy Sector Update for 06/08/2018: BHGE, XOM, CVX, RDS.A, RDS.B, BP, E, COP, TOT, PBR, PBR.A, EC, SLB, HAL, NOV, SPN

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(Updates with the oil price move, EIA/Goldman Sachs reports, and general commentary from the first paragraph.)

Crude slipped on Friday but traded little changed over the week after pressure on oil prices from signs the U.S. again inched closer to becoming the world's largest oil producer were counterbalanced by risks to the global output from geopolitical worries in Iran and cuts in Venezuela.

Data from energy services firm Baker Hughes ( BHGE ) showed late Friday the number of oil rigs operating in the U.S. over a rolling seven-day period ending June 8 rose by one to 862, its highest level since March 13, 2015.

The combined oil and gas rig count in the U.S. climbed by two to 1062 as gas rigs also inched up by one to 198. In Canada, the number of oil rigs in operation jumped by 13 to 69, while the number of gas rigs was flat at 43. As a result, the North American total climbed by 15 to 1,174 in the week and compared with 1,059 a year ago, the data showed.

Given the growth in the U.S. rig count, it is unsurprising production in the country hit another new record last week of 10.8 million barrels per day, according to data from the Energy Information Administration ( EIA ) Wednesday, bringing the U.S. closer to Russia's estimated 11 million barrels per day of output.

EIA data also showed crude stockpiles surged by 2.1 million barrels over a week to June 1 - that compared with expectations for a 1.8 million-barrel drop in a Reuters' poll of analysts. Also bearish for oil prices this week was data showing China's crude imports in May retreated to 9.2 million barrels per day (bps) from a peak of 9.6 million bpd in the previous month, according to customs data Friday.

But, oil prices were underpinned this week by a robust global demand outlook and growing geopolitical concerns that posed a risk to global output.

In an attempt to debunk the record U.S. production issue, Goldman Sachs Group ( GS ), in a report issued Monday, pointed out certain key Permian States were the primary drivers of U.S. oil growth during February and March.

"In recent months, investor/company concerns around constraints to Permian growth have been in focus given that the Permian is expected to represent the bulk of total U.S. oil production growth over the next several years," Goldman analysts led by Brian Singer wrote in the report noted.

Goldman said it continued to see 1.8 million bpd of global oil demand growth in 2018, ahead of the International Energy Agency's forecast of 1.4 million bpd. Singer noted global gross domestic product is tracking above 4.0%, supporting robust demand statistics in the U.S., China, India, and Southeast Asia. "Strong oil demand trends support our Brent forecast of $75-$80 per barrel for the remainder of the year."

Apart from demand, oil prices were underpinned by continuing economic crisis in Venezuela, forcing cuts to the beleaguered country's oil production. Additionally, the U.S. plans to reinstate sanctions against Iran, the third-biggest producer in the Organisation for Petroleum Exporting Countries (OPEC), are also likely to hit crude production and exports.

Last month, OPEC's crude production dropped for the fourth month in a row to 31.9 million barrels a day, its lowest level in more than a year, according to a report from MarketWatch that cited a survey conducted by S&P Global Platts of industry officials, analysts, and shipping data.

Still, JPMorgan Chase & Co. isn't buying the positive outlook for crude prices in the near term. According to media reports, JPMorgan analysts cut their 2018 crude forecast for West Texas Intermediate ( WTI ) by $3 to $62.20 a barrel.

Intraday Friday, both Brent and WTI futures were down marginally, bringing the change over the week to almost flat.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , Energy
Referenced Symbols: BHGE , EIA , GS , WTI , XOM

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