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The oil price suspended its growth

7 December 2020
1800
2 min.
4
The oil price suspended its growth

The rise in the oil price stopped

On Friday, oil prices continued to rise, but by this morning the information background had noticeably deteriorated.

Weekly statistics from Baker Hughes continue to point to increased drilling activity in the US. Last week the number of active drilling rigs rose to 246. (+5 mouths). Canada also saw an increase of 2 mouths, to 40 active rigs. The number of active gas rigs in the USA and Canada decreased by 4 rigs.

As an indicator of future production, the number of rigs indicates recovery in the sector and prospects for production growth. Current levels are still not sufficient to maintain stable production over the long term. However, current oil prices may trigger an acceleration of drilling activity as early as Q1, leading to revised projections for 2021.

Over the weekend, measures to contain the COVID-19 epidemic were tightened in several regions of the world. Reuters reports increased social distancing measures in California, German Bavaria and South Korea. This news is not unexpected, but it is a reminder that the epidemic is still relevant and that even the early start of vaccination will not avoid a negative impact on the economy and oil demand in the next few months.

Meanwhile, preparations have begun in Iran to increase exports. The Islamic Republic of Iran hopes that the administration of the new president will return to the nuclear deal terminated by Trump and ease sanctions on oil and gas exports. The Iranian Oil Ministry has been ordered to prepare its production plants to reach full capacity within three months, Reuters reported citing the state media.

Prior to 2018, Iran was exporting around 2 million b/d before the US withdrew from the nuclear deal. It is difficult to assess current exports as the country is hiding its vessels to circumvent sanctions. Estimates range from 300 to 700,000 bps.

Iran is not constrained by the OPEC+ deal, which will allow it to increase production unhindered if the sanctions are lifted. In reality, however, it is too early to talk about this. The procedure could take more than one month and will be thoroughly discussed by officials in the US, whose opinions may differ.

Persons1 and Companies3 in the news

45th President of the United States
1 place
Baker Hughes
2 place
Reuters
3 place
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