Weekend Review: Crude Oil Tanks After Increase in US Oil Rigs

On Friday, Baker Hughes released
the number of inventories in the United States. The numbers showed that the
number of oil rigs in the US increased by 7 to 854. This was a continuation to
the ramp-up in production that started in January 2016, when the US had just
332 oil rigs. The total rig count in the US, that combines the natural rigs
wells increased to 1049, which was higher than the previous week’s 1045. The
increase in oil rigs is probably the reason why the price of crude oil has
started the week by declining sharply as shown in the chart below.

On Friday, the Department of
Agriculture released the February’s World Agricultural Supply and Demand
Estimates (WASDE). This is a monthly report that shows the estimated demand and
supply metrics for the agricultural sector. The report showed that the ending
stocks for wheat had increased by 36 million bushels. The production of wheat
for 2018/9 was raised by 1.3 million tons, mostly because of a huge supply from
Russia. Corn imports are expected to be lower with production also lowered. The
harvested area is also expected to be low. The production of soybeans is
expected to be lower while US beet sugar production is expected to be
unchanged. The chart below shows the reaction of these crops to the WASDE report.

In the United States, talks
between the Democrats and Republicans broke down over the weekend. The two
sides were negotiating on how to fund the government operations in a bid to
prevent another government shutdown. The talks have been ongoing and have been
geared towards coming up with a deal that will protect the undocumented
immigrants while also funding the Trump wall. According to the Wall Street
Journal, the two negotiating teams had cut off communications. This means that
a government shutdown will likely happen this week. With the country already in
election mood, there is a likelihood that the shutdown will continue for a
longer time than expected.

The problems in the European
Union continued over the weekend as Italian populist government attacked the
central bank and the stock market regulator. Matteo Salvini, the country’s head
of the League party said that the leaders of these organization deserved to be
removed and ‘jailed for a long time.’ This came after the two were attacked by
Luigi Di Maio, who leads the anti-establishment Five Star Movement. This also
came a week after Mario Draghi, the ECB president and the former Bank of Italy
president said that the independence of the central bank was under threat. All
this comes at a time when Italy is going through a major challenge in its
economy. Recent data showed that the economy is in a recession.

Over the weekend, problems in Deutsche
bank continued as its funding costs continue to rise. Last week, the bank sold
more than €3.6 billion in euro-dominated debt, paying 180 basis points over the
benchmark two-year bond. The bank also paid 230 basis points over the benchmark
on a seven-year bond. That was a higher rate than other European banks. This
comes as the bank considers merging with its German competitor, Commerzbank.

The post Weekend Review: Crude Oil Tanks After Increase in US Oil Rigs appeared first on Forex.Info.

Source:: Weekend Review: Crude Oil Tanks After Increase in US Oil Rigs

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