US drilling activity slows - ING

The oil market strengthened over the last week thanks to a variety of global events, with the ICE Brent Aug-25 contract settling almost 5.9% higher. Canadian wildfires provided support, while the market is digesting announced supply hikes for July from OPEC+. The US jobs report for May on Friday also provided a boost. Meanwhile, the US and China are holding their second round of trade talks in London today, ING's commodity experts Ewa Manthey and Warren Patterson note.

US market has been more constructive recently

"It's no surprise that with the market moving higher, speculators increased their net long in oil. Speculators bought 42,496 lots in NYMEX WTI over the last reporting week, leaving them with a net long of 163,078 lots as of last Tuesday. This move was predominantly driven by fresh buying, producing the largest weekly increase since early January."

"Buying in ICE Brent was more modest, with speculators purchasing 8,813 lots, leaving them with a net long of 167,763 lots. The US market has been more constructive recently, which is also reflected in the narrowing of West Texas Intermediate's (WTI) discount to Brent. The Canadian wildfires, which led to some production shut-ins, provided some relative support to WTI."

"In the US market, drilling activity continues to slow. Baker Hughes data shows that the oil rig count fell for a sixth consecutive week, the longest period of declines since mid-2023. The rig count fell by 9 last week to 442, taking the total decline over the last 6 weeks to 41. The combination of increased OPEC+ output, modest US crude oil supply growth and the potential for output declines next year supports the idead of a narrowing in the Brent-WTI spread."