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OPEC and Rig Counts and Storms

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The energy markets started Friday on softer footing then quickly turned and followed the recent upward momentum. Markets continued to concentrate on renewed talks of an OPEC supply-focused meeting in September. Despite little probability of any agreed upon action, or even minimal effectiveness of such an action, markets participants took this as a profit taking sign in an overall bearish market.

On Friday, September WTI reached its highest outright level since July 22nd, about a $5.50 increase from the August 3rd low of $39.19. With this increase in outright price, carry in the WTI curve has come off its low. The September-December curve reached a recent high of only $2.00 of carry, coming in from $2.50 to start the month.
On Friday, Baker Hughes released their weekly rig count figures, showing an increase of 15 rigs for the week. Though one week of this data does not mean too much, it does mark the seventh week in a row that rig counts have increased. How this trend continues going forward will be worth watching.
Weather related news was on the forefront this weekend. The East Coast saw a prolonged heat wave, with temperatures well above normal. As a result, the cooling-degree days for the month will likely be elevated. This puts pressure on the natural gas inventory levels, as power facilities use more fuel to keep customers’ elevated demand met. The Gulf Coast region was ravaged by significant flooding over the weekend. The storm and subsequent historic flooding closed roads and forced evacuations for many Louisiana parishes in low lying areas. The state of Louisiana declared a state of emergency in response to the storm, and our thoughts go out to the families who have lost loved ones and those displaced by the floods.

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