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Gold steadies around $1,980; down $20 for the week
Gold price bottomed at $1,971 on Friday, after the release of better-than-forecast US S&P Global PMI; and then rebounded to $1,980. The yellow metal dropped $20 from the level it had a week ago, suffering the worst weekly fall since February.
Global Growth Prospects Continue to Improve
Given the sheer size and influence of China’s economy, upward revisions to China’s growth outlook can have positive implications around the world and boost our global GDP forecast. With China’s economic rebound still intact, another global GDP growth upward revision could be forthcoming.
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Today, the US Baker Hughes oil rig count increased to 591 from the previous count of 588. This uptick comes after weeks of decline, mostly driven by low oil prices.
The US rig count- a weekly tally of the number of active rigs drilling for oil and natural gas in the US- has been on a general decline since 2015. At it’s peak, on October 10th, 2014, the figure was 1,609, but it had since dropped by over sixty percent to 609 by the end of 2019.
This current increase, for the first time since mid-June, coincides with a rebound in global oil prices, fuel demand recovery, and some OPEC+ output reductions. In addition, these figures reflect the increased activity in the onshore shale oil and gas fields, especially in the Permian Basin, which is located in western Texas and New Mexico. An expected production increase of around 0.3 million barrels a day driven by new projects, such as ExxonMobil’s new facility in the area, is seen as a major factor driving the increase in rigs.
However, industry analysts degree of optimism is muted, with many noting that the rebound might be temporary. Across the US, natural gas inventories have climbed to a five month high, and the rapid bankruptcy of oil and gas companies has left an uncertain landscape for the industry. As the sector faces the potential for sustained low oil prices, US producers may once again be forced to make cost cutting decisions, putting future rig counts in doubt.
In a larger context, there still is great uncertainty spurred by the coronavirus pandemic, which is impacting global oil demand. As the US waits for demand to pick up and stabilize, producers will remain cautious in their investments until more answers come to light.
Overall, the US has seen an increase in its Baker Hughes rig count, causing some optimism in the energy sector. Nevertheless, with global oil demand still uncertain, the long-term prognosis remains unclear.
