- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Last week, Brent oil price continued to recover its losses through declines in U.S. commercial oil inventories and with a halt in
Further positive statements from Saudi Energy Minister Khalid al-Falih regarding the possible extension of the oil cut pact for 2019 accelerated this price recovery.
The official announcement of the OPEC and Non-OPEC Joint Ministerial Monitoring Committee (JMMC) regarding the record conformity levels to the oil cut deal was another form of assistance in bolstering oil prices.
Support was also found with the geopolitical conflict between Iran and Israel in the Middle East at the beginning of last week and the closure of the El Feel oilfield in Libya, which on average produces around 70 thousand barrels per day.
However, recuperation in the dollar index due to the release of January’s Federal Open Market Committee minutes last Wednesday limited the upward trend in prices.
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 began the week with a rise to $65.67 through rising tension between Israel and Iran.
However, it slid down to $65.25 owing to a rise in the dollar index on Tuesday.
It recovered to $65.42 through a decline of 0.90 million barrels in U.S. oil inventories, as detailed in the weekly API report on Wednesday.
It continued its ascent to $66.39 on Thursday through the weekly lowering of 1.61 million barrels in U.S. commercial oil inventories, according to the EIA’s weekly report on Thursday as well as a decrease in U.S. crude oil production by a thousand barrels per day to 10.27 million barrels per day from the previous week ending Feb. 16. Declines in the U.S. dollar index also aided this price increase.
Brent surged and settled at $67.31 at the end of the week with the closure of the El Feel oilfield in Libya.
The OPEC and Non-OPEC JMMC, based on its Joint Technical Committee (JTC) report, officially announced last Thursday, Feb. 22, that participating countries in the oil cut agreement reached 133 percent, a record conformity level that was achieved with great efforts from several countries.
One of the most important cornerstones for the increase in oil prices since the second quarter of 2017, along with OPEC and non-OPEC participating countries oil cut agreement, is the rise in global oil demand, which is driven mostly by decreases in the U.S. dollar index. Since President Donald Trump’s inauguration in January 2017, the dollar index has fallen despite three interest rate hikes throughout the year. Currently, the markets are becoming familiar with the new Fed Chair, Jerome Powell, and his interest rate policy. However, the Trump administration’s attempts to maintain a low dollar index will continue to offset the Fed’s next interest rate hike. Therefore, a weak U.S. dollar index is set to continue to support oil prices during Powell’s tenure.
Markets would like to see oil prices reaching over $70 again, but this is dependent on declines in OECD commercial oil inventories that would need to endure to ramp up prices to over this level. Brent oil will continue to fluctuate between $66 and $68 this week, amid the recent diminished growth in U.S. oil production and declines in U.S oil inventories.
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