Just recently, oil prices hit a two-year high – but now, this week they have started to head lower. What is going on? Are sliding oil prices a reflection of cold feet?

As I write this, according to Bloomberg Energy, WTI Crude is down to $56.96 per barrel (a -1.03% change) and Brent Crude is at $62.77 per barrel (a -1.32% change).  This is down about $1 per barrel from yesterday.

So what is causing folks to be nervous and uncertain and to have cold feet? Shouldn’t our toes be cozy and warm with WTI in the high $50s?

Contributing Factors to Cold Feet:

• Rig Count

The rig count may be a factor contributing to the uncertainty in oil prices. As we all know, the rig count is typically used as an indicator of demand – increasing rig count should hopefully correlate to increasing demand for oil and gas. Increasing rig count can become an issue if it is out of sync with demand – if it outpaces demand.

According to the Baker Hughes Rig Count Overview & Summary Count, the last U.S. rig count was from November 22, 2017 and the total domestic rig count was 923 rigs – up 8 from the prior count and up a whopping 330 from the same time last year. The Canadian rig count has reportedly similarly increased 7 rigs since the prior count and 41 from the same time last year, while the International rig count is also reportedly on the rise with 20 more rigs in October 2017 from the prior count in September of 2017 (a 31 rig increase from the same time in October 2016).

• OPEC Meeting – Tomorrow

The 173^rd meeting of the Organization of Petroleum Exporting Companies (“OPEC”) is tomorrow, November 30. The upcoming OPEC meeting could be contributing to price uncertainty because it is unclear whether OPEC will continue to extend production cuts. Prices have been holding relatively steady and have been on the rise, which makes folks wonder about the future of OPEC production cuts. Many are reportedly concerned that “[t]he Nov. 30 gathering is likely to have a different tone than the last two OPEC meetings, because global oil demand has strengthened, inventories have tightened, prices are on the rise, and trading technicals appear bullish.” In the Bloomberg article, “War of Words Threatens to Upend OPEC Meeting,” geopolitical tensions are also listed as a factor that could potentially end hopes of extended oil production cuts.

The New York Times took a different perspective of the upcoming OPEC meeting in its article entitled, “OPEC Leader Cites ‘New Optimism’ With Oil Prices on the Rise” – namely, that the prior production cuts to some extent, appear to have worked. Political issues from across the world – from Venezuela to Russia – are also noted as contributing factors by The New York Times.

• Supply Concerns

Concerns over supply also may be contributing to the cold feet – the headlines say it all:

1. Wall Street Journal: “Oil Near Flat After Data Shows Drop in U.S. Inventories”
2. Nasdaq: “U.S. Oil Production Hits 4^th Straight Record High Ahead of OPEC Meeting”
3. Bloomberg: “OPEC’s Clash with U.S. Oil Is Nearing Its Day of Reckoning”

As usual, predicting what is going to happen with oil prices is darn-near impossible. For now, all we can do to temper the uncertainty is to be sure to wear really warm socks…

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