Oil cheapen due to the growth of drilling activity in the USA
Today, Brent crude is trading near $ 63.5 per barrel, while the cost of WTI is close to $ 60 per barrel. The growth of drilling activity in the United States was a reason for the significant decline in oil quotations. According to a report published last Friday by Baker Hughes the number of active drilling rigs in the United States increased by 26 pieces and amounted to 791 units. This is a record value for almost 3 years.
Increase in drilling activity is an indicator of future increasing oil production, so the report from Baker Hughes caused a rapid collapse in oil prices.
The growth of production in the United States is worried by OPEC and Russia. They are trying to restore balance in the energy market. The production of oil in the US has already exceeded 10 million barrels per day. This amount is equal to the volume of production in Saudi Arabia. If the US shale continues to increase production, in the near future they will shift Russia from the position of the world leader in oil production.
In addition, due to lower prices for WTI oil, American manufacturers are gradually capturing the Asian market. In January, the volume of oil supplies from the US to China rose to 400 000 barrels per day. This forced Saudi Arabia to declare a decline in prices for its own Arab Light since March 2018.