Crude prices gained over the week despite the huge weekly build in US inventories as reported by the Energy Information Administration (EIA). Stockpiles rose by 7.9 million barrels, taking the cumulative increase to 30 million barrels over the last seven weeks. Brent crude rose to $62.51 per barrel while WTI advanced to 57.24.
Bullish signs for the oil price continue to emerge amid positive China manufacturing data and falling US rig counts. The number of US oil and gas rigs fell for the 11th time in the last 12 weeks. According to Baker Hughes, the total number of active oil rigs in the US decreased to 684. This brings the total oil and gas rig count down to 817, which is 250 rigs down from this time last year.
The consecutive drops in the US rig count makes WTI crude oil prices at the level of mid or low $50s unsustainable.
It also raises questions about the production forecasts being put out by the EIA as well as the International Energy Agency (IEA) and the narrative that suggests there will still be plenty of oil being produced even if prices remain in the low $50s range.
Although economic uncertainty continues to dominate the market, the upward momentum in oil prices encouraged money managers to increase their net-long positions in Brent and WTI crude oil futures for the third week in a row, after months of pessimism.
This is underpinning trading volumes in Brent and WTI, despite concerns about slowing global growth, the US-China trade war and other geopolitical factors that may have otherwise pointed to a supply glut. Brent crude oil futures and options money managers increased their net-long positions by 28,353 contracts to 282,352 contracts in the week ending Nov. 5. WTI net long positions grew by 11,793 contracts to 116,468 over the same period.
Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq