- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
The Brent oil price failed to stay over $47 mainly due to increases in U.S. oil production. The oil markets are awaiting the meeting between OPEC and Non-OPEC producers in Moscow on July 24, amid anticipation of further oil cuts. Moreover, the strong U.S dollar continues to put pressure on oil prices.
Oil markets last week will be reviewed based on the U.S. dollar index, weekly American Petroleum Institute (API) and Energy Information Administration (EIA) crude 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 surge to $49.68 through the surprising decrease in production by 100 thousand barrels per day to 9.25 million barrels per day in the U.S. ending June 23 as reported by the U.S.’ weekly EIA crude oil production and a two-count drop in the U.S. Baker Hughes rig count from the previous week despite gains in the U.S. dollar index. However, its eight-day ascent halted at $49.61 due to the strong U.S. dollar on Tuesday.
On Wednesday, a rise in the U.S. dollar index and with the Russian Energy Minister Alexander Novak’s statement, which declared there was no need to cut more oil production to stabilize oil prices, a sharp decline to $47.79 was seen.
However, it regained some losses to $48.11 through a weekly decrease of 5.764 million barrels in U.S. oil inventories as reported in the weekly API report. In addition, a decrease of 6.299 million barrels in U.S. oil inventories as reported by the Energy Information Administration’s (EIA) weekly report along with the decline in the U.S. dollar index also propped up prices. This price increase was despite the boost in U.S. crude oil production by 88,000 barrels per day to 9.338 million barrels per day for the week ending June 30 as reported by the U.S.’ weekly EIA crude oil production.
However, at the end of the week, it dropped and settled at $46.71 due to a seven-count rise in the weekly U.S. Baker Hughes data and a rise in the U.S. dollar index.
In brief, oil price dropped below $47 mainly due to the increase in U.S. crude oil production and on speculation in oil markets that OPEC and non-OPEC producers need to cut more oil to alleviate the global surplus.
Furthermore, increased U.S. oil production resumed following a one- week break because of the tropical storm in the Gulf of Mexico two weeks ago.
Therefore, although Russian Energy Minister Alexander Novak said recently that further cuts could be made if necessary, he also added that to the contrary, they could be reduced. Nonetheless, oil markets will closely follow any speeches made by OPEC members at the World Petroleum Congress to evaluate if further cuts are likely before a decision is made at the upcoming meeting on July 24.
Lately, the U.S. dollar although showing some weakness lately is still well valued. Despite complex data from the U.S economy, the FED still has further interest rate hikes on the agenda for the remainder of the year. Therefore, it seems that oil prices will be kept under pressure from the valuable U.S dollar in the future.
Taking into the account the developments above, oil markets will keep closely watching changes in U.S. oil production. Rises in the Brent oil price to over $48 could be seen if strong declines in U.S. oil production and U.S. oil inventories occur. If not, declines towards $45 are likely.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.