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

Last week, Brent oil fluctuated between $68 and $70 as expected, but the rebound in U.S. oil production, the dollar recovery, as well as rises in U.S. oil inventories caused a price drop to below $68.

Undoubtedly, the recent chaos in the financial markets caused further price declines, although these should be temporary.

The big question to consider is whether the oil supply cuts of OPEC and non-OPEC countries will offset the negative impacts on prices should a rise in U.S. oil production occur.  

Declines in the U.S. dollar index, which Donald Trump’s administration encourages, promises to continue to support an upward trend in oil 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 started the week with a decline to $69.46 owing to a rise in the U.S. dollar index and a twelve oil rig count rise in the U.S. from the previous week.

It continued down to $69.02 due to an increase of 3.22 million barrels in U.S. oil inventories, as detailed in the weekly API report on Tuesday.

It increased slightly to $69.05 through a decline in the U.S dollar index on Wednesday.

On Thursday, the price continued its ascent to $69.65 with further declines in the dollar.

However, it dropped further and settled at $68.58 at the end of the week with a stronger dollar.

U.S. crude oil production continues to rise as oil prices increase. Daily production in November 2017, as reported in the EIA Monthly Crude Oil and Natural Gas Production Report, reached 10.038 million barrels per day, almost equivalent to the record set in November 1970 with 10.004 million barrels per day. Such high production levels could pressure oil prices and could compel OPEC and non-OPEC producers to take action by further cutting output.

However, on the demand side, a weak U.S. dollar is set to continue to support global oil demand, and accordingly, help the global oil supply-demand balance. Therefore, oil markets will continue to watch changes in the U.S. dollar index, amid the Fed’s interest rate hikes projections for 2018.

The recent big slumps in the financial markets, namely the indexes in the U.S. stock market, which started to post losses last week and saw a crash last Friday, impacted oil markets. However, these losses are set for a rebound given that some experts believe that the drop is merely a “market correction” from high levels set in January.

Oil markets will continue to focus on these changes and on U.S. oil production and commercial oil inventories, amid the recent chaos in the financial markets. Brent oil is likely to move between $66 and $69 this week. 

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