Energy Sector Update for 10/26/2018: BHGE, XOM, CVX, RDS.A, RDS.B, BP, E, COP, TOT, PBR, PBR.A, EC, SLB, HAL, NOV, SPN
(Updates with the oil price move, EIA reports, and general market commentary from the first paragraph.)
Crude prices fell for a third week as a volatile equity market weighed on the oil market, which grappled with concerns oversupply will return by the end of 2018 and trade rows will undermine growth in demand for oil.
Late on Friday, Baker Hughes ( BHGE ) said the number of oil rigs operating in the US rose by two to 875, climbing for a third week to the strongest level since March 6, 2015, according to data from energy services firm, which tracked the seven-day period ending Oct. 26. The combined oil and gas rig count in the US climbed by one to 1,068 as gas rigs fell by one to 193.
In Canada, the number of oil rigs in operation rose by one to 124, while the number of gas rigs jumped by eight to 76. As a result, the North American total climbed by 10 to 1,268 in the week and compared with 1,100 a year ago, the data showed.
The Energy Information Administration ( EIA ) said Wednesday US crude inventories advanced for a fifth week in a row, increasing by 6.3 million barrels over a week to Oct. 19. That compared with expectations for a 3.7 million-barrel jump in a Reuters' survey of analysts, adding to supply concerns in the market as about 29 million barrels have been added to the stockpiles in the past five weeks.
The EIA anticipates US crude output will average 10.7 million barrels per day this year compared with 9.4 million barrels per day in 2017. In its Weekly Petroleum Status Report, the EIA said production held steady at 10.9 million barrels per day during the week ended Oct. 19.
Reuters cited Saudi Arabia's OPEC governor Adeeb Al-Aama as saying on Thursday oil markets could face oversupply by the end of 2018. "The market in the fourth quarter could be shifting towards an oversupply situation as evidenced by rising inventories over the past few weeks."
Additionally, Saudi Energy Minister Khalid al-Falih also told Reuters there could be a need for intervention to reduce oil stockpiles after increases in recent months.
In addition, the oil complex was also weighed by the volatility in equity markets, with almost two-thirds of the MSCI's global equity index hitting the bear-market territory. On Friday, global stocks headed for their fifth consecutive week of losses and look set to record their worst month since 2011.
In line with weaker equity markets, the S&P500 index is also close giving up all of its gains recorded in 2018. That comes ahead of the U.S. mid-term elections in which President Trump's Republican Party is set to lose the House, weakening his grip on power, and amid fears the ongoing trade conflicts will undermine corporate profits.
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