PRICE RISE SLOWS AS GASOLINE DEMAND LEVELS OUT
Demand in gasoline is starting to level out as the economy starts to settle into partially-open daily life. This is appearing in gasoline prices as the national average increased only 3 cents this week vs over 5 cents each week since mid-May. “Demand levels are likely to ebb and flow in the coming weeks as people continue to be cautious about travel,” said Jeanette Casselano, AAA spokesperson.
There might actually be a reversal in price direction coming soon as some parts of the country see an increase in coronavirus cases causing talk of increasing restrictions again. The energy market is VERY sensitive to how active the economy is.
Although gasoline inventory is finally slowly reducing, crude oil, propane, and distillates (jet fuel, diesel, etc) are still building. It won’t take much to upset the balance enough for prices at the pump to fall again.
THE US DRILLING RIGS DROPS ANOTHER 5 IN NEW MEXICO
There was another drop in rig count across the US this week, marking the 15th straight week of reductions to now 266 from a peak of 793 rigs early March. 38% (5 rigs) of this week’s drop was from the New Mexico Permian and 15% (2 rigs) from the Texas Eagle Ford basins.
The count of rigs drilling vertical wells has actually shown an uptick the last couple weeks from 8 up to 14. Vertical rigs tend to be lower cost than horizontal, which may mean oil companies are still willing to invest in the smaller projects which usually have faster returns or are some other way strategic for business (like holding leases).
Tracy LenzJune 24, 2020
