- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy

Brent oil surpassed $65 as a result of the temporary closure of one of the largest oil pipelines in the U.K for repairs- the Forties North Sea pipeline that supplies around 450,000 barrels of oil per day. China’s oil demand rise and declines in U.S. oil inventories also supported this high price level. Meanwhile, the rise in the U.S. crude oil output, although ongoing, is not at sufficient levels to threaten the oil cut volumes of OPEC and non-OPEC participating countries for now. Furthermore, the steady rise of the U.S. oil rig count is not currently posing a significant threat. However, a stronger U.S. dollar ahead of the U.S. Federal Open Market Committee meeting on Dec. 13 when they will likely hike interest rates could curtail further temporary oil price rises.

Oil markets last week will be reviewed based on the U.S. dollar index, weekly American Petroleum Institute (API) and Energy Information Administration (EIA) oil inventories, weekly EIA field production of crude oil in the U.S. and the weekly U.S. Baker Hughes rig count.

Brent oil began the week with a fall to $62.45 due to a two-oil rig count increase as reported in Baker Hughes data from the previous week and a rise in the U.S. dollar index.

However, it recovered to $62.86 through the weekly lowering of 5.48 million barrels in U.S. oil inventories, as detailed in the weekly API report and an increase in the U.S. dollar index on Tuesday.

The price dropped to $61.22 due to the continual increase in U.S. crude oil production by 25 thousand barrels to 9.707 million barrels per day for the week ending Dec. 1, as reported by the EIA and a further rise in the U.S. dollar index.

However, it recuperated to $62.20 on Thursday and settled at $63.40 at the end of the week. This was based on demand rise for crude oil in China and with only two oil rig count increase in the U.S., according to Baker Hughes.

Declines in U.S. oil inventories had a decisive impact on the increase in oil prices last week. After OPEC members and non-OPEC participants’ decision to extend the existing oil cut agreement beyond March 2018 to the end of 2018 on the supply side, oil markets started to focus more on the demand side. With signals of higher growth in the world economy and a devalued U.S. dollar since Donald Trump’s inauguration in January 2017, demand for crude oil increased and resulted in the reduction in global oil inventories. The recent rises in crude oil demand in China is also another indicator of the rise in global oil demand this year. Therefore, with these moves towards positively balancing supply and demand, the target goal of rebalancing the oil market looks closer.

The U.S. dollar index continued to gain value on expectations of the Fed’s interest rate hike on Dec. 13 after the U.S. Senate approved a tax overhaul. The Fed will likely increase its interest rate by 0.25 from 1.25 to 1.50 but it does not mean the U.S. dollar will gain further value to pressure oil prices as this expectation has already been priced in and reflected in the index.

Further rises in Brent oil exceeding $65 could arise and in the mid-term could reach $70. However, if rises in U.S. crude oil production and oil inventories occur, declines below $65 would be applicable.

- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.