The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil secured prices over $75 with declines in global oil inventories thanks in part to the ongoing higher compliance levels of OPEC and non-OPEC participating countries’ oil cut agreement. This increase was also supported, albeit temporarily, by geopolitical concerns. Trump’s decision to terminate Iran’s nuclear deal has been met with pressure from other European leaders. The missile attacks on Syria by U.S., French and British forces in retaliation for chemical attacks also weighed in. An explosion on a Libyan pipeline, which incurred losses of between 70,000 barrels per day (bpd) and 100,000 bpd also caused supply concerns and ramped up prices.
However, global oil inventories still remain a divisive factor in supply and demand dynamics and are crucial in setting prices. The oil price increases through a reduction in surplus supplies could be offset by the rise in U.S. oil production and the recovery in the U.S. dollar index.
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 weekly U.S. Baker Hughes rig count.
Brent oil started the week with a fall to $71.42 with potential rises in production from a seven-count increase in U.S. oil rigs compared to the previous week, according to Baker Hughes data.
It recuperated to $71.58 through the lowering of 1.04 million barrels in U.S. inventories, as detailed in the weekly API report on Tuesday.
It surged to $73.48 with the drop of 1.07 million barrels in U.S. commercial oil inventories as detailed in the weekly EIA report on Wednesday.
On Thursday, it continued its ascent to $73.78 through greater expectations of further declines in global oil inventories.
It increased and settled at $74.06 at the end of the week with positive news of a high compliance rate to the oil cut agreement of OPEC and non-OPEC participating countries.
OPEC and non-OPEC participating countries continue to show great cooperation in their alliance. According to the OPEC and Non-OPEC Joint Ministerial Monitoring Committee (JMMC), adherence to the oil cut agreement broke another record with an 11 percent month-on-month increase to reach 149 percent in March 2018. Furthermore, they announced a drop in commercial stock levels in OECD countries by 300 million barrels, from 3.12 billion barrels in July 2016 to 2.83 billion barrels in March 2018.
However, increases are evident in U.S oil production, especially shale oil, and in the oil rig count as oil prices rise. According to the latest EIA drilling activity report dated April 16, U.S. shale oil production is forecast to rise by 125 thousand barrels to 6.996 million barrels per day in May 2018.
Moreover, a recovery in the U.S. dollar index from the recent oil price hikes have increased the possibility of further interest rate hikes. Such a U.S. dollar recovery could curb recent oil price increases and prices could fall below $75 this week.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.