Prior to the opening of the Olympic Games in Brazil is still far, but the time records has already begun. However, not sports, and at the same time quite doubtful for the world economy. Thus, according to the weekly report of the oilfield services company Baker Hughes, last week increase in the number of active oil rigs in the United States set a record.
The number of active drilling rigs in just one week increased by 105 units and now exceeds 460 pieces. This means that the United States has intensified extraction of shale oil, and, as we see an increase in production volumes is happening even at a price below the threshold of profitability at $ 50 per barrel - is relevant to the production of this kind of oil. And last Friday on the news the price of Brent oil fell by almost 1%, breaking a very significant level of support for the market at $ 45 per barrel.
What will happen: if oil returns to this year's level of $ 50 per barrel, and whether the level will not be in the $ 60 per barrel unattainable in the near future? We do not think so.
The situation with an increase in shale oil production is quite predictable. Rather, the main driver of the oil price reduction is not now offer and demand. The world economy, including in the EU economy, while oil provides mixed signals to the market. On the one hand, the recovery of the European economy (and Europe - one of the largest consumers of oil in the world) is already happening, and the so-called Brexit this is not much hindered, and on the other - have negative expectations from the International Monetary Fund that the resulting output UK EU global GDP in the current and next year will lose 0.1%. Nevertheless, it is important to note that, despite the negative impact Brexit for global demand, the supply side too, rapid growth is not noticeable. Moreover, oil experts, debit shale wells in the United States this year fell by almost 7% compared to last year, from which it follows that the rapid growth in supply has not yet seen.
In addition, small and medium-sized US oil company this year began to actively enter the IPO and to place additional issues of equity, it would be difficult, if they expect future oil market oversupply and falling demand for raw materials. And with the beginning of the year, American oil companies have raised a total of $ 16 billion in the IPO and secondary offering. At the same from week to week in the US commercial inventories are reduced. Therefore, we believe that the current drop in oil prices is temporary, the next level of support we see at the levels of $ 41-42 per barrel, and the rise in oil prices to $ 50 a barrel and above is possible, according to our estimates, by the end of the third quarter.