Oil prices which began to rise on Friday have weakened by the background details on Monday. WTI dropped by -1.08% while Brent fell -0.93% to settle at $45.76 to $48.79 respectively.
Baker Hughes’ weekly figures appear to show a rise in drilling activity in the United States. The number of active rigs increased to 246 rigs last week (+5 rigs). Canada also saw an increase by 2 installations to 40 active installations. In the United States and Canada, the number of active gas installations has declined by 4.
The number of rigs, as an indication of potential demand, suggests a turnaround in the sector and expectations for growth in production. In order to sustain a steady output level for a long time, current levels are still inadequate. However, current oil prices may lead to an increase in shale drilling activity growth in the first quarter, leading to a revision of the 2021 forecasts.
Over the weekend, in many regions of the world, efforts to contain the COVID-19 outbreak have been tightened. According to Reuters, social distance initiatives in California, Bavaria and South Korea have increased. This news is not surprising, but it reminds that the pandemic is still important and that even the early start of vaccination would not allow the world to escape adverse effects over the next few months on the economy and on oil demand.
Meanwhile, Iran has started to plan to boost oil exports. The Islamic Republic hopes that the new President’s administration will return to the Trumped-out nuclear agreement and relax the restrictions on oil and gas exports. Reuters announced that Iran’s oil ministry was directed to prepare production facilities to hit maximum capacity within three months, citing state media.
Iran exported around 2 million barrels per day until 2018, prior to the US withdrawal from the nuclear agreement. It is hard to determine current exports, as the nation hides its vessels to avoid sanctions. Estimates range from 300,000 barrels per day to 700,000 barrels. Reuters reports Iran’s production at about 2.1 million barrels a day, compared to 3.8 million barrels a day in the summer of 2018.
Iran is not bound by the OPEC+ restrictions, which will allow it to increase production without hindrance if sanctions are lifted. In fact, however, it is too early to talk about this. The process will take several months and will be extensively debated in the United States by officials whose views will vary.