- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy

Brent oil fluctuated between $55 and $57 but was unable to stay above $57 per barrel. This price range was down to the relatively strong U.S. dollar and was influenced by Russia, the de facto leader of non-OPEC producers, along with Saudi Arabia, the de facto leader of OPEC, whose supportive statements on oil market stability during Russian Energy Week 2017 helped buoy up prices. Potential damage inflicted on the oil and gas industry in the Gulf of Mexico from the Tropical Storm Nate also caused concern for oil production and refinery outputs. However, Storm Nate did not negatively affect the industry as much as Strom Harvey did last month, so its impact on oil prices is set to be ephemeral. Meanwhile, the rise in U.S oil production, and accordingly oil exports, continue to be a significant threat to OPEC and non-OPEC’s efforts to drain the global oil surplus. 

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 started the week with a drop to $56.12 due to a sharp increase in the U.S. dollar index and the six-oil rig count rise as reported in Baker Hughes data from the previous week

On Tuesday, the price slid down to $56.00 because of the unchanged U.S. dollar index despite the weekly decrease of 4.08 million barrels in U.S. oil inventories, as detailed in the weekly API report.

However, on Wednesday the growth in U.S. crude oil production of 14,000 barrels per day to 9.56 million barrels per day for the week ending Sep. 29, as reported by the EIA, saw a decrease down to $55.80. This price fall was despite the weekly decline of 6.02 million barrels in U.S. commercial oil inventories, according to the Energy Information Administration’s (EIA) weekly report and a drop in the U.S. dollar index.

On Thursday, the oil price surged to $57 per barrel from positive signals that Saudi Arabia and Russia would opt for an extension to the oil cut agreement beyond March 2018 in spite of the sharp increase in the U.S. dollar index.

However, the price plunged and settled at $55.62 due to the fears that Tropical Storm Nate would impair the oil and gas industry around the Gulf of Mexico despite the easing of the U.S. dollar index and an oil rig count drop of two, as reported by Baker Hughes at the end of the week.

In brief, last week Brent decreased to $55.62 from $57.54 due mainly to the relatively strong U.S dollar and Storm Nate.

As U.S. oil production and exports increase, cooperation between Russia and Saudi Arabia to provide oil market stabilization has been on the rise. They already extended the existing agreement by nine-months until the end of March 2018 and are now seeking to extend the oil cut pact further until the end of 2018. Their presidents and ministers gave the green light to such an extension idea last week during Russian Energy Week 2017 and also during the Saudi King’s first ever visit to Russia.

However, Saudi Arabia, in particular, has been bearing the burden of this agreement and although the country is considering a further extension, it will likely not want to increase the volume of its cuts. Instead, they will possibly urge other oil producers to join their oil cut pact to expand oil cuts for higher oil prices.

Venezuelan Oil Minister Eulogio Del Pino claimed last week that he invited 10-12 oil-producing countries to participate in the OPEC and non-OPEC oil cut deal. If these new countries decide to contribute, they could agree to extend the pact at OPEC’s meeting on Nov. 30 with greater quantities of oil until the end of 2018. Furthermore, some countries, like Kazakhstan, who have already committed to the oil curb, could readjust their production with the new deal.  

Brent oil could reach over $57 on further depletions in U.S. oil inventories and if U.S. crude oil production wanes. If not, declines towards $55 could be seen.

- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.