- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil wavered around $70 per barrel last week because of three main factors. The high compliance rate to the oil cut agreement of OPEC and non-OPEC participating countries, the sharp decline in the U.S. dollar index since January 2017, and the consequential rise in global oil demand, which helped remove the surplus over the five year average in OECD stockpiles since the second half of 2017.
Nonetheless, concern in the oil markets has arisen as to when these price increase trend will abate. This has been supported by the possibility of OPEC and non-OPEC’s exiting from the oil cut agreement at a time when the pricing environment is encouraging more investment by U.S. shale oil producers.
Considering the increased possibility of greater U.S. oil production and the usage of electric vehicles in the near future, the onus is on OPEC and non-OPEC countries to cooperate further to hold onto their share of the market.
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 the weekly U.S. Baker Hughes rig count.
Brent oil started the week on Jan. 8 with a rise to $67.78 with five oil rig count decline in the U.S. from the previous week.
On Tuesday, the decline of 11.19 million barrels in U.S. oil inventories, as detailed in the weekly API report, pushed prices up to $68.82.
The price further jumped to $69.20 with a big slump in U.S. crude oil production by 290 thousand barrels per day to 9.492 million barrels per day for the week ending Jan. 5 as well as the weekly drop of 4.94 million barrels in U.S. commercial oil inventories, according to the EIA’s weekly report on Wednesday.
It continued its ascent to $69.26 and settled at $69.87 at the end of the week with sharp falls in the U.S. dollar index.
The U.S dollar has been continuing its decline since January 2017. This slump deepened last week with lower inflation rates in the U.S. along with rises in the euro boosted by Germany taking a step closer to form a coalition government last week. As a result, oil prices have been released from the pressure of a higher U.S dollar index.
The Energy Information Administration (EIA) released January’s Short-Term Energy Outlook last week – an important indicator of the health of the oil industry. It said it expects growth in global oil consumption to be 1.7 million barrels per day in 2018 and 1.6 million barrels per day in 2019, coming mainly from non-OECD countries. Furthermore, U.S. crude oil production is anticipated to be 10.3 million barrels per day in 2018 and 10.8 million barrels per day in 2019.
The International Energy Agency (IEA) and OPEC Monthly Oil Market reports will also release their reports this week.
Oil markets will continue to focus on changes in U.S. oil production and commercial oil inventories, which will come, amid a relatively lower U.S. dollar index this week. Oil inventory levels in OECD countries in both the IEA’s and OPEC’s monthly reports will also be followed closely. Brent oil is likely to fluctuate in the range between $69 and $71 this week.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.