The oil industry can have a direct impact on the manufacturing industry here in the United States of America. As oil prices increase, there’s a need for more industrial components as oil companies begin opening new operations to try and capitalize on the booming market. So it’s no surprise manufacturers are keeping their ear to the ground when the news breaks that oil prices are experiencing their fourth weekly loss. Today, Friday 6/16/2017, prices rebounded after reaching an all time low in 2017 but it still has some manufacturers concerned about the future.
Data suggests that a rise in U.S. production and weak domestic gasoline demand has wreaked havoc on oil prices. Lukeman Otunuga, research analyst at FXTM made a statement regarding WTI reaching its lowest level since November 14, 2016. He explained “bearish investors exploited the unexpectedly large build in gasoline inventories to instigate renewed rounds of selling,”. http://on.mktw.net/2rmruT5
In May, the Organization of Petroleum Exporting Countries (OPEC) agreed to extend the pledge to cut oil output by 1.8 million bpd. Originally scheduled to end in June, it will now extend until March. This agreement was reached in hopes of cutting down global inventories to balance supply and regain ground in regard to oil price. However it seems as though rising U.S. oil output has negated any impact from the OPEC-led output cuts. The latest data from the U.S. Energy Information Administration (EIA) suggests growing U.S. gasoline stocks and shaky demand to be a major factor leading prices to yearly lows.
“Oil is unlikely to find solace into the weekend either, with tonight’s Baker Hughes Rig Count expected to deliver its now weekly increase of operational rigs,” Jeffrey Halley, Sr. market analyst at futures brokerage OANDA in Singapore stated. http://reut.rs/2taGmVF
As the charts below suggest , 2017 has been a difficult year for the oil industry. Even with OPEC’s output cuts, supply continues to outpace demand. This is causing many in the manufacturing industry to wonder what the future holds and how it will impact their business. It will be vital for businesses to keep a close eye on these trends as the manufacturing industry moves forward.[WTI] [Brent]
Be sure to check back on Manufacturing Talk Radio soon for the latest updates on the oil and manufacturing industry. Having an idea of where the industry is heading can help make planning for the future easier to manage.