Oil Falls Impact Rig Count

As some us awake bleary-eyed with an hour less sleep after the spring forward clock change, we find the markets have not been sleeping at all as oil falls.

Oil has fallen from a three month high (by just over 3%) on the news that Iran will not be freezing its production, at least until it has reached its target output of 4m barrels per day.

That means even less US oil and gas rigs will operate as they typically have higher production costs.  Baker Hughes reported Friday that the rig count is at its lowest level since 1949, with only 386 US rigs still pumping.  To put this in perspective, in 2011, when oil was nearer $100 a barrel, over 2000 rigs were operating!

Analysts are predicting oil to remain in the range of $37 to $42 a barrel through the spring, so we are unlikely to be seeing $26 for a while.  A rally in currencies in emerging markets has added weight to that, with rising global equity markets regaining an appetite for commodity risk.  Since February, we can see the rising trend across several commodities.

When looking at natural gas, you can see that in the last ten days, prices have risen around 15%!  This creep in energy prices may have gone unnoticed by some. Still, to any organization using natural gas in volume, this is either a missed opportunity to grab a bargain or a price hike, which could have been avoided.

Vervantis take away the problem of energy market price risk from commercial and industrial energy consumers using proprietary energy supply agreements and value at risk (VaR) processes. Using our strategic approach and energy procurement advice, organizations can take advantage of market lows, mitigate the risk of price creep, and prevent energy discussions becoming a lesson in hindsight management.

To learn more about our risk management strategies you can contact us here or call our sourcing experts now: 1-888-988-5474