More oil rigs put aside/BoJ, JGBs/the consumer/Car prices

Watching still the US producer response to lower prices, and they are doing what they should be doing, laying down more rigs. The Baker Hughes crude oil rig count fell by another 9 rigs over the past week and is now lower by a sizable 41 rigs in 6 weeks to 442. That's the least since October 2021. This was interesting too from a Bloomberg article this morning on oil where they quote a Morgan Stanley note with regards to OPEC, "Notwithstanding the around 1 million barrel a day increase in production quotas between March and June, an actual increase in production is hard to detect. Notably, it does not appear that production in Saudi Arabia has ramped up significantly." I'll also add, lower crude oil production will also lead to less production of natural gas as a byproduct. That said, with natural gas near $4 per btu, the natural gas rig count has jumped to 114 from about 100 in most of May.

I'll repeat my belief that oil is cheap in the low to mid $60s and we remain long a bunch of oil and gas stocks.

Crude Oil Rig Count

Natural Gas Rig Count

Ahead of the BoJ meeting next week we watch for any hints on what they might do with their asset purchase program of JGBs where they continue to reduce what they are buying but are becoming more sensitive to the sharp rise in yields. We've of course already got word that they are debating whether to cut back the balance sheet shrinkage but on the other hand, there was a story over the weekend that they might, as part of that, just extend into 2027 the reduction in its holdings. We also wonder if there are any talks with the US on the yen as part of any trade deal that comes. I'm skeptical though that anything comes of that.

Nikkei News reported that "The Bank of Japan, the country's biggest government bond holder, intends to continue reducing Japanese government bond purchases after April 2026, allowing interest rates to be determined more freely by the market, Nikkei has learned. The original plan to reduce JGB purchases was to last through March 2026, but that will likely be extended." JGB yields were up slightly after the recent drop, the yen is higher while the Nikkei rallied almost 1%. We continue to like and are long stocks in Japan.