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

Brent oil came close to reaching $53 per barrel again but generally sustained over $50 last week. The main support to this pricing level was through further drops in U.S. oil inventories, the slowing up of the rise in the U.S oil rig count along with relatively weaker U.S dollar index. However, the sharp surge in U.S crude oil production halted price increases.   

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 price began the week with a drop to $50.73 due to signs of decline in China’s oil demand.  The three rig-count rise as reported in the U.S. Baker Hughes data from the previous week and the increase in the U.S. dollar index also contributed to the curbing of prices. On Tuesday, the price increased to $50.80 through a weekly decrease of 9.20 million barrels in U.S. oil inventories as detailed in the weekly API report, despite the rise in the U.S. dollar index.  

However, it declined to $50.27 on Wednesday due to the rise in U.S. crude oil production of 79 thousand barrels per day to 9.5 million barrels per day for the week ending Aug. 11, as reported by the U.S.’ weekly EIA crude oil production report.  This decline was despite a fall of 8.95 million barrels in U.S. commercial oil inventories, according to the Energy Information Administration’s (EIA) weekly report as well as a downturn in the U.S. dollar index. 

On Thursday, the price recuperated to $51.03 impacted by a decline in U.S oil inventories in spite of a stronger U.S. dollar index.

Brent oil prices climbed and settled at $52.72 at the end of the week with a decline in the U.S. dollar index as well as a five-count decline in the weekly U.S. oil rig count as per Baker Hughes data.

In brief, last week Brent oil slightly increased to $52.72 from $52.10 mainly through drops in U.S commercial oil inventories.

With further falls in U.S commercial oil inventories in August 2017, inventories reached 466 million, even though crude oil output reached 9.5 million barrels per day. The oil rig count jumped from 316 in May 2016 to 758 in June 2017. However, there has been only five-rig count rise up to now from June. The sustained growth trend in the oil rig count appears to be ending due to low oil prices, and accordingly, declines in U.S. crude production, especially in West Texas Intermediate (WTI), are likely to follow in the weeks to come.

Since Trump’s inauguration with continued political disputes in his administration, the U.S. dollar index has remained relatively weak. The European Central Bank‘s (ECB) normalization of its economic policy through ending its bond buying program and the possibility of rising interest rates has also curtailed the dollar’s strength. However, interest rate decisions made by the Central Banks are significant elements that governments take into account while formulating their foreign trade policies particularly to gain a competitive edge in foreign trade. Taking these aspects into consideration, slight fluctuations in the U.S. dollar index are likely.                    

This week, fluctuations in the Brent oil price between $50 and $53 could be seen as long as further slumps in U.S. oil inventories occur, but declines in U.S crude oil production would be needed if prices are to reach over $53.

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