- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil saw prices over $58 per barrel in the main through the independence referendum in Northern Iraq and with the high conformity rate of OPEC and non-OPEC countries to the oil cut agreement. However, U.S. crude oil production after Hurricane Harvey is currently about to revert to production levels seen prior to the storm and promises to surpass these levels in the weeks to come thanks to recent price hikes. Furthermore, with the U.S. Fed set to apply one more interest rate increase in 2017, the ongoing U.S. dollar loss could come to an end for the remainder of 2017.
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 slight decline to $55.48 despite a modest drop in the U.S. dollar index and a seven-oil rig count fall as reported in Baker Hughes data from the previous week.
On Tuesday, the price continued down to $55.14 due to a weekly rise of 1.44 million barrels in U.S. oil inventories as detailed in the weekly API report, despite a slump in the U.S. dollar index.
However, the price surged to $56.26 on Wednesday on expectations that OPEC and non-OPEC countries would extend the oil cut pact beyond March 2018 at their meeting in Vienna on Sept. 22. This price rise was despite a sharp climb in the U.S. dollar index and the growth of 4.59 million barrels in U.S. commercial oil inventories, according to the Energy Information Administration’s (EIA) weekly report. The large growth in U.S. crude oil production of 150,000 barrels per day to 9.51 million barrels per day for the week ending Sep. 15, as the EIA reported, did not negatively affect the upward pricing trend.
The price continued its ascent to $56.43 and settled at $56.86 at the end of the week through OPEC and non-OPEC countries’ high compliance levels, declines in the U.S. dollar index and a drop in the oil rig count by five, as reported by Baker Hughes.
In brief, last week Brent climbed to $56.88 from $55.62 mainly through OPEC and non-OPEC countries’ high compliance to their agreement and the subsequent positive expectations from their meeting.
The recent referendum debate in Northern Iraq, in which Kurdish independence has been put to the vote, was held although many neighboring countries object in principle to the holding of the election. Turkey had issued warnings, and on Monday, Sept. 25 Turkish President Recep Tayyip Erdogan stated that Turkey would cut off Northern Iraqi oil exports of around 550,000 barrels per day through the Kirkuk-Ceyhan pipeline should Northern Iraq’s autonomous government insist on implementing the referendum results.
The Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) reported that the Joint OPEC-Non-OPEC Technical Committee (JTC) found that OPEC and participating non-OPEC producing countries had the highest conformity level at 116 percent in their production cut agreement for August 2017. They also noted that commercial oil stocks in the Organization for Economic Co-operation and Development (OECD) countries reduced by 168 million barrels since the beginning of this year, but that a reduction of 170 million more barrels of stock is required to reach the latest five-year average.
The Federal Open Market Committee meeting, which took place last Wednesday, saw that most of the attendees are expecting one more interest rate hike by the end of 2017. As a result, the U.S. dollar index is set to rise until this hike occurs. However, this could be an obstacle for further oil price increases.
This week, Brent oil could reach $60 if Turkey cuts off Northern Iraq’s oil exports through Turkey, and if slumps in U.S. oil inventories and in U.S crude oil production occur. If not, declines towards $57 are likely.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.