- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil price prevailed over $50 fluctuating up to $53 through Saudi Arabia’s oil export cut, big drops in U.S. oil inventories along with a relatively weaker U.S. dollar. In addition, the decline in U.S. oil production and with no pickup in the U.S. oil rig count supported prices at this level. However, the conformity level in the oil cut agreement between OPEC and non-OPEC has become questionable. Furthermore, sanctions on Venezuela worry oil markets over the impact of the country’s oil supplies.
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 rise to $48.60 through Saudi Arabia’s statement of the country’s planned cuts in oil exports to 6.6 million barrels per day for August. The one rig-count decline in the U.S Baker Hughes from the previous week also supported this increase. This was despite a slight increase in the U.S. dollar index. On Tuesday, the price surged to $50.20 through a weekly decrease of 10.23 million barrels in U.S. oil inventories as reported in the weekly API report.
On Wednesday, it continued its ascent to $50.97 through a drop of 7.21 million barrels in U.S. oil inventories as reported by the Energy Information Administration’s (EIA) weekly report. The fall in U.S. crude oil production of around 19,000 barrels per day to 9.41 million barrels per day for the week ending July 21 as reported by the U.S.’ weekly EIA crude oil production report and a decline in the U.S. dollar index also backed the price rise.
The price continued up to $51.49 on Thursday with positive effect of falls in both U.S oil inventories and production despite a rise in the U.S dollar index, and settled at $52.52 at the end of the week with a sharp decline in the U.S. dollar index and only a two-count rise in the weekly U.S. rig count for week July 24-28 as outlined in Baker Hughes data.
In brief, last week Brent oil jumped to $52.52 from $48.06 mainly through Saudi’s oil export cut decision, a drop in U.S oil inventories and a weaker U.S. dollar.
According to the Joint Ministerial Monitoring Committee (JMMC) at its 4th meeting on July 24, the oil cut conformity level between OPEC and non-OPEC countries was 98 percent. Although this level is very high, it is less than conformity levels in previous months. Accordingly, oil markets began to question the solidarity between OPEC and Non-OPEC in production cuts. However, some OPEC and non-OPEC countries will meet to discuss this issue in Abu Dhabi on August 7-8 to assure oil markets although reliable and accurate production data for producing countries is hard to collate.
The U.S. government’s objections to a controversial vote to change Venezuela’s Constitutional Assembly in favor of Venezuelan President Nicolas Maduro’s tightening stronghold on the country amid opposition protests resulted in the U.S.’ imposition of sanctions. Oil markets anticipated that sanctions would be placed on oil imports from Venezuela to the U.S., but in the end, only individual sanctions on Maduro were imposed, including the freezing of his bank accounts in the U.S. Further sanctions on Venezuela are not expected, and therefore, the impact on oil prices are contained for now.
Political disputes over Trump’s presidency and his governance in the U.S. have caused the weakening of the dollar that has diluted the effect on oil prices.
Oil markets will continue to focus on changes in the U.S. oil production and U.S. oil inventories under a relatively weaker U.S dollar. Rises in the Brent oil price to over $53 may be seen if strong declines in U.S. oil production and U.S. oil inventories continue to occur. If not, declines towards $50 are likely. Oil prices are likely to move in the narrow price range between $50 and $53 within the next couple of weeks.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.