- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil settled over $57 with Tropical Storm Nate in the Gulf of Mexico having caused declines in U.S. commercial oil stockpiles and a slight fall in U.S. oil production. From a geopolitical viewpoint, the escalating tension in Iraq between the Central government in Baghdad and the autonomous Kurdish Regional Government in Northern Iraq propped up prices. U.S. President Donald Trump’s latest sanction threats on Iran over the nuclear deal in 2015 also threatened output and bolstered prices. Furthermore, the International Energy Agency’s (IEA) Monthly Oil Market Report’s forecast, which was optimistic for 2018, had impacted higher oil prices last week.
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 slight rise to $55.79 through a drop in the U.S. dollar index and the two-oil rig count decrease as reported in Baker Hughes data from the previous week. On Tuesday, the price boosted to $56.61 with a fall in U.S. dollar index.
On Wednesday, the price continued it ascent to $56.94 through further declines in the U.S. dollar index and with OPEC’s forecast of greater oil demand in 2018 despite the weekly rise of 3.09 million barrels in U.S. oil inventories, as detailed in the weekly API report.
However, it fell to $56.25 due to an increase in the U.S. dollar index on Thursday. This price downturn was despite the weekly decline of 2.75 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 and the lowering in U.S. crude oil production of 80,000 barrels per day to 9.48 million barrels per day for the week ending Oct. 6, as reported by the EIA.
Nevertheless, Brent soared and settled at $57.17 with the rising tension in Iraq between the central government and the KRG along with Trump’s sanction threats against Iran over what he claimed was non-compliance with the nuclear deal in 2015. The oil rig count drop of five, as reported by Baker Hughes at the end of the week also contributed to boosting prices.
Storms in and around oil production fields and refineries always impact oil prices depending on the severity of the damage inflicted. For example, both Hurricane Harvey and Storm Nate impacted oil prices due to reduced U.S. oil production. However, Harvey caused more destruction and forced the closure of more refineries than Storm Nate.
The geopolitical disputes last week in and around oil exporting countries that influenced oil prices include the recent dispute in Iraq, which endangered exports from Northern Iraq. The Trump debate over sanctions on Iran’s nuclear deal, until resolved, promises to temporarily alter market pricing.
OPEC and IEA oil market reports released last week are optimistic for 2018 forecasting oil demand growth of 1.4 million barrels per day. However, the IEA highlighted that global oil demand declined to 1.2 million barrels per day in the third quarter from 2.2 million barrels per day in the second quarter of 2017.
Although the recent upward price trend is only temporary, Brent oil could reach $59 on further depletions in U.S. oil inventories or if U.S. crude oil production wanes. If not, declines towards $56 could be seen.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.