- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil enjoy hit prices over $57 with a drop in U.S. oil production, which was affected by Tropical Storm Nate in the Gulf of Mexico. Furthermore, the production disruption that occurred in and around Kirkuk while the Iraq Central government was disposing the semi-autonomous Kurdish Regional Government (KRG) in Kirkuk in Northern Iraq also impacted output and bolstered prices. Commercial oil stocks and new oil rigs count in the U.S. continued to decrease. At the same time, OPEC and non-OPEC producing countries that agreed to the oil cut agreement have reached the highest conformity level ever in September 2017.
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 rise to $57.82 with decreases in Iraqi oil production and exports due to the dispute between the KRG in Northern Iraq and the Central government in Baghdad stemming from the KRG’s independence referendum. The five-oil rig count decrease as reported in Baker Hughes data from the previous week kept prices above $57.
On Tuesday, the price continued its ascent to $57.88 with the weekly drop of 7.13 million barrels in U.S. oil inventories, as detailed in the weekly API report.
The price surged to $58.15 through a decline in the U.S. dollar index and the weekly decline of 5.73 million barrels in U.S. commercial oil inventories, according to the Energy Information Administration’s (EIA) weekly report. The fall in U.S. crude oil production by over a million barrels per day to 8.4 million barrels per day for the week ending Oct. 13, as reported by the EIA ensured this upturn.
Although it fell to $57.23 with the selling position in the market on Thursday, it settled at $57.75 with an oilrig count drop of seven, as reported by Baker Hughes at the end of the week.
On the demand side, OPEC and non-OPEC producing countries’ Joint Ministerial Monitoring Committee (JMMC) held in Vienna on Sept. 21, claimed that, based on the report of its Joint Technical Committee (JTC) for the month of September 2017, the conformity level to the output pact reached the highest level ever with 120 percent. In addition, the committee stated that commercial oil stocks in OECD countries continued to fall in September, but said that 159 million barrels of stock need to be drained to reach a five-year average of oil stocks in the OECD. On the other hand, Fatih Birol, the executive director of the International Energy Agency (IEA) during the 18th World Knowledge Forum in Seoul, which opened on Oct. 17, said that OPEC and non-OPEC contributing countries’ compliance was about 86 percent. He added that a rebalance in the oil market could be seen sometime in 2018 if they continue their oil cut agreement.
On the supply side, the recent dispute over Kirkuk between the KRG and the Central government reduced oil production and exports from the region last week. However, the Iraq Petroleum Minister stated while attending the Baghdad International Fair last weekend, which runs from Oct. 21 to 30, that there were no losses in oil production or in exports from the country due to the dispute as oil production in Basra and the southern part of the country increased. A fall in U.S. crude oil production occurred last week due to Storm Nate, but this is set to quickly recover since fields restarted operations.
On the financial side, the U.S. dollar index has seen recent increases. However, the route the index will take will be revealed after the Europe Central Bank (ECB) makes its decision on interest rates and on its bond-buying program and with the U.S. Fed meeting this week. Rises in the U.S. dollar index would put further pressure on oil prices.
Although the recent upward price trend looks ephemeral due to global oil supply problems caused by geopolitical issues and the recent freak weather conditions, 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.