The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil failed to sustain over $75 due to increases in the U.S. dollar index and further fluctuated through news of U.S. President Donald Trump’s possible decision to pull out of Iran’s nuclear deal.
With the ongoing rises in U.S. oil production, commercial oil stockpiles, and oil rig counts, negative signals are being sent to mitigate future price increases.
Last week’s oil markets will be reviewed based on the U.S. dollar index, weekly American Petroleum Institute (API) and Energy Information Administration (EIA) oil inventories, weekly EIA crude oil production in the U.S. and weekly U.S. Baker Hughes rig count.
Brent oil started the week with a rise to $74.71 with concerns that Trump would place new sanctions on Iran ahead of the meeting between France President Macron and Trump.
However, it declined to $73.86 owing to a rise of 1.09 million barrels in U.S. inventories, as detailed in the weekly API report on Tuesday.
It recovered to $74 on Wednesday with uncertainty over what the U.S. president will decide on Iran’s nuclear deal.
Although it continued its ascent to $74.74, it slid down and settled at $74.42 at the end of the week due to increases in the U.S. dollar index.
Iran and the U.S. have had rigid relations since the Iran Revolution in 1979. However, the U.S. and its European partners lifted sanctions against Iran in return for Iran reining its ambitions to develop nuclear power at the beginning of 2016 just before Barack Obama left office. Subsequently, many European energy companies started to invest in Iran to develop the country’s rich energy resources, and at the time, oil prices plunged to $27 per barrel with speculation of the lifting of sanctions. At the end of 2016 when Trump was elected U.S. president, more hawkish foreign policy statements from the U.S. were released. Since Trump’s election, he has threatened to terminate the nuclear deal with Iran many times. Now, it has become one of the main drivers of oil price changes. It is expected that Trump will announce his final decision on this deal on May 12.
Contrarily, Iran Oil Minister Bijan Zanganeh sent a message to Trump by stating that the agreement between OPEC and non-OPEC producers to curtail output need not be extended if oil prices further increase. He added that the U.S. has gained the most benefits from the oil cut agreement with oil production and price increases seen in the U.S.
The recovery of the U.S. dollar index through expectations of a high inflation rate in the U.S. is ongoing but could break this week. Therefore, Brent oil is likely to move between $72 and $75 this week.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.