July crude oil futures go away today and it will be up to the August crude futures to find a bottom. As U.S. oil production is showing signs of faltering (up only 12,000 barrels in June as opposed to an expectation of 120,000 barrels) and seeing we are past the pain of many shale producers, U.S. rig counts will slow in the coming weeks and we may see the count start to fall. Maybe that is why Saudi Arabia is not so worried about the uptick in oil production from Nigeria and Libya.

One would think that Saudi Arabia would be freaking out since oil has gone down about $10 a barrel since the ill-fated OPEC meeting when they extended production cuts but failed to make a still deeper cut. The UPI reported that OPEC Saudi oil minister Khalid al-Falih said that, "members exempt from an effort to balance the markets through production declines pose no threat to objectives.” Speaking to London-based newspaper Asharq al-Awsat, Saudi oil minister Khalid al-Falih said on Libya that it wasn't his place to weigh in on what he described as a slow pace of recovery in production. "They shouldn't be considered a threat to the initiative," he was quoted as saying. "Current expectations indicate the market to rebalance in the fourth quarter of this year considering an increase in shale oil production," he said. The UPI says that, “Secondary industry sources told OPEC economists that Nigerian crude oil production in May increased 11 percent to about 1.7 million barrels per day. Libyan crude oil production increased more than 30 percent to 730,000 bpd and the director of the state oil company said last week that total production should hit the 1 million bpd mark by the end of July.”

The drop in oil prices could start to freeze output. While the rig counts move forward, compilations are falling in a sign that prices are starting to stress some producers. With U.S. oil output gains slowing, we could be close to another short-term peak in oil production and getting close to a top is the U.S. rig count. Or as the Saudi oil minister might say, "What? Me Worry?”

Maybe we should start to worry about an early start to the U.S. tropical storm season. NOAA's National Hurricane Center has issued Tropical Storm Warnings for Texas and Louisiana due to the presence of Potential Tropical Cyclone Three that may become Tropical Storm Cindy before making landfall along the U.S. Gulf Coast. While the storm may not be a whopper, it will influence shipping and may impact imports and exports of oil for next week. Right now, the winds are 40 miles an hour and has an 80% chance to become Tropical Storm Cindy in the next 24 hours. Keep an eye on announcements of evacuations of offshore oil and gas platforms today. Potential Tropical Cyclone Three is located about 305 miles south-southwest of the mouth of the Mississippi River and is moving to the northwest at 8 miles per hour. It could also disrupt traffic into the Mississippi impacting grains and other markets as well.

If one storm is not enough for you, let’s make it two. The Weather Channel reports on Tropical Storm Brett which will continue to spread heavy rain and gusty winds across the southern Windward Islands and northeastern Venezuela through Tuesday. The National Hurricane Center puts Tropical Storm Brett 75 miles east-southeast of Isla Margarita, moving swiftly toward the west-northwest. Brett is expected to move near or along the northeast coast of Venezuela Tuesday and into the extreme southeastern Caribbean Sea by late Tuesday. Tropical storm warnings are in effect for portions of the northeastern coast of Venezuela. Heavy rain, gusty winds and increased seas are expected to be the main threats in these areas into Tuesday. This system is no threat to the U.S. mainland. 

Natural gas took a hit do to cooling temperatures but a return to heat could soon heat up this market. Tropical storms could also but not as much as it might have during the pre-shale gas days.

The EIA says that Gulf of Mexico area, both onshore and offshore, is one of the most important regions for energy resources and infrastructure. Gulf of Mexico federal offshore oil production accounts for 17% of total U.S. crude oil production and federal offshore natural gas production in the Gulf accounts for 5% of total U.S. dry production. Over 45% of total U.S. petroleum refining capacity is located along the Gulf coast, as well as 51% of total U.S. natural gas processing plant capacity.

Still the EIA did say that U.S. crude oil production in the Federal Gulf of Mexico (GOM) set an annual high of 1.6 million barrels per day (b/d) in 2016, surpassing the previous high set in 2009 by 44,000 b/d. In January 2017, GOM crude oil production increased for the fourth consecutive month, reaching 1.7 million b/d. On an annual basis, oil production in the GOM is expected to continue increasing through 2018, based on its forecasts.

However, long-term trends also affect GOM oil production. The number of rotary rigs operating in the GOM decreased from an average of 55 in 2014, when the Brent crude oil spot price began dropping to 22 in 2016. The number of development and exploratory wells has fallen in each year since 2012. Although the number of operating rotary rigs in the GOM increased from 2012 to 2014, falling crude oil prices in 2014, along with drilling delays caused by the 2013 discovery of faulty rig safety equipment, led to decreasing drilling activity in that period.