- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
The ongoing spread of unrest and protests in Iran that began last Thursday, Dec. 28, supported the rise in oil prices, which hovered around $67 at the start of the year.
Additionally, the limited U.S.’ oil production increases have failed to alter this upward pricing trend amid persistent slumps in commercial oil stockpiles.
A weaker U.S. dollar index continues to back global oil demand and remains one of the biggest factors for the support of OPEC and non-OPEC participating countries in the extension of the oil cut agreement to the end of 2018.
In light of all the above influences in gauging the trajectory of oil prices in 2018, oil markets will closely watch for changes in U.S. oil production and will monitor the possibility of an exit from the oil cut agreement, the effects from which are not anticipated to be seen before June 2018. Therefore, in early 2018, further rallies for oil prices are likely.
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 the weekly U.S. Baker Hughes rig count.
Brent oil started the week on Tuesday, Dec. 25 with a surge to $67.02 because of reduced output in Libya’s oil production of around 100 thousand barrels per day as a result of a blast on its crude oil pipeline. A decline in the U.S. dollar index also aided this rise.
However, on Wednesday it slid down to $66.44 with oil traders maximizing profits after this price surge.
The price recovered losses and registered at $66.72 with a decline in U.S. crude oil production by 35 thousand barrels to 9.75 million barrels per day for the week ending Dec. 22, as reported by the EIA, and the weekly drop of 4.6 million barrels in U.S. commercial oil inventories, according to the EIA’s weekly report on Thursday.
However, it continued its ascent and settled at $66.87 at the end of the week with an unchanged U.S. oil rig count, as reported by Baker Hughes, and a fall in the U.S. dollar index.
Speculation over whether OPEC and non-OPEC participating countries’ would extend the oil cut agreement has now been replaced with conjecture as to when participants will exist from the pact. However, the threat of the rise in U.S. oil production and the proliferation in the use of electric vehicles in the mix is likely to encourage further cooperation to positively affect oil pricing.
Moreover, the Saudi Arabian Oil minister Khalid Al Falih, speaking on behalf of the de-facto leader of OPEC, along with Russia’ Energy Minister Alexander Novak, the de-facto leader of non-OPEC, stated many times that it is too early to discuss an exit from the oil cut agreement. Their reassurances of a consensus between OPEC and non-OPEC for a review of the agreement in June also promise to contain the fluctuations in oil prices.
Oil markets will closely watch developments in the unrest in Iran, but changes in U.S. oil production and commercial oil inventories are likely to be the main indicators on pricing. Therefore, Brent oil is likely to move between $66 and $68 this week.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.