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August marks another loss for US oil rig usage amidst global dynamics

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2023-08-28

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Once again, August has proven to be a month of losses for oil rig activity in the US, with a recent decline adding to the trend.

The weekly report released last Friday by energy-services firm Baker Hughes revealed a decrease of eight oil rigs operating in the US. The tally for oil rigs plummeted to a 17-month low of 512 from the prior count of 520. Meanwhile, the number of gas rigs slipped by two, settling at 115. The count for miscellaneous rigs remained unchanged at five.

Comparing this to data from a year ago, the US boasted 605 oil rigs, 158 gas rigs, and two miscellaneous rigs in operation, illustrating a decline of approximately 15% in the span of a year.

Additionally, the current count is notably below the peak of 627 rigs seen on December 2 of the previous year, a 3-1/4 year high. In total, 632 rigs were operational across the US in the latest report, marking a decrease of over 17% compared to the 765 rigs in operation a year earlier.

This situation is further complicated by rumors of potential production increases from Iran, Iraq, and Venezuela. Such actions could offset the strategies of Saudi Arabia and Russia, both committed to production cuts aimed at bolstering prices. Reports suggest that Venezuela is in talks with the Biden administration regarding a deal to boost oil output.

Despite these developments, US crude oil production in the week ending August 18 registered a 0.8% rise, reaching 12.8 million barrels per day (bpd), marking the highest figure in over three years. While this production level is slightly below the February 2020 record-high of 13.1 million bpd, analysts contend that the ongoing decline in US oil rig numbers must eventually slow due to rising output.

Friday saw an increase in crude prices, with Brent crude rising by $1.42 (1.7%) to $84.78 per barrel, and US West Texas Intermediate (WTI) crude climbing by $1.02 (1.29%) to $80.07 per barrel. Over the month, Brent prices have remained steady, while US crude experienced a slight decrease.

Oil prices were boosted by investors in response to Federal Reserve Chair Jay Powell's speech, which left oil and other commodity markets largely unaffected. Concurrently, US Treasury bond yields eased to 4.23%, having reached a 17-year high of around 4.36% earlier in the week.

In the realm of precious metals, December Comex Gold dipped by $7.20 to $1,939.90 per ounce. September Silver remained unchanged at $24.23 per ounce, while September Copper saw a 1 cent decrease, settling at $3.76 per pound.

For the week, gold experienced a 1.30% increase, silver surged by 6.5%, and copper gained 1.2%. Attention was directed towards Beijing's deliberations over measures to support its economy, potentially stimulating demand for metals.

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