- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil hovered around $69 this week and failed to remain above the $70 per barrel threshold it broke on Monday raising the question of whether prices over this $70 level are sustainable.
How quickly the oil stockpile surplus over the five-year average of OECD countries’ will be alleviated would go a long way to answer this question. The drawdown of the stockpile will depend on the rise in both U.S. oil production and global oil demand, supported by a weak U.S. dollar index.
Meanwhile, the International Energy Agency (IEA) and OPEC Monthly Oil Market released their reports last week and highlighted a decline in commercial oil inventories in OECD countries.
Furthermore, OPEC and non-OPEC countries compliance to their oil cut agreement also successfully continued to increase, as reported at the latest OPEC/Non-OPEC Joint Ministerial Monitoring Committee (JMMC), which convened in Muscat, the Sultanate of Oman, for its seventh meeting, on Jan. 21.
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 with a rise to $70.26 through a weak U.S. dollar. However, it declined to $69.15 with oil traders profiteering in the markets on Tuesday.
It increased to $69.38 through the decline of 5.12 million barrels in U.S. oil inventories, as detailed in the weekly API report on Wednesday.
On Thursday, the price slid down to $69.31 owing to the rebound in U.S. crude oil production by 258 thousand barrels per day to 9.75 million barrels per day for the week ending Jan. 12.
It continued down and settled at $68.61 at the end of the week with concerns over a supply rise in U.S oil production and a slight rise in the U.S. dollar index.
Declines in oil inventories, which began during the second half of 2017, have accelerated. According to the International Energy Agency (IEA) Monthly Oil Market Report, OECD commercial oil stockpiles dropped in November by 17.9 million barrels and data is expected to reveal a fall by 42.7 million barrels for December.
On the other hand, OPEC’s Monthly Oil Market reported that OECD commercial oil stocks stand at 2.933 million barrels – a 133 million barrel surplus over the five-year average.
Moreover, according to the OPEC/Non-OPEC Joint Ministerial Monitoring Committee (JMMC) on Jan. 21, OPEC and non-OPEC countries adherence to their oil cut agreement reached 129 percent - a record high.
Oil markets will continue to focus on changes in U.S. oil production and commercial oil inventories, supported by a relatively weaker U.S. dollar index. Based on the controlled inventories in the market and the compliance to the oil output deal, Brent oil could start to be sustainable over $70 from this week on.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.