- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil price hovered around $65 and struggled to make further gains due to uncertainty over whether U.S. oil supply growth would offset efforts of OPEC and non-OPEC countries in removing the global oil surplus. For 2018, the question persists as to whether global oil supply growth will absorb greater global oil demand amid the decline in global inventories.
Last week, the beginning of the U.S.’ trade war announced by President Donald Trump is an important development in impacting the global oil trade.
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., weekly U.S. Baker Hughes rig count, and current political and market developments.
Brent oil began the week with a rise to $67.50 through concerns over possible declines in oil and gas production after the earthquake in Papua New Guinea where oil and gas production was halted at several facilities, and a slight decline in the U.S. dollar index.
However, it slid down to $66.63 owing to a rise of 0.93 million barrels in U.S. oil inventories as detailed in the weekly API report on Tuesday.
It continued down to $65.78 due to a further rise in the U.S. dollar index, the weekly lowering of 3.01 million barrels in U.S. commercial oil inventories, according to the EIA’s weekly report on Wednesday as well as a rise in U.S. crude oil production by 13 thousand barrels per day to 10.28 million barrels per day from the previous week ending Feb. 23.
On Thursday, Brent plunged to $63.83 based on concerns over the U.S.’ crude oil supply growth and the start of a global trade war by the U.S.
It recovered and settled at $64.37 at the end of the week with a decline in the dollar index.
Trump announced a trade war last week when he introduced tariffs on steel and aluminum imports to counteract the U.S.’ huge foreign trade deficit. Before and after his inauguration, he declared many times that he would take measures to resolve this problem and reverse it. Some of these measures involve weakening the U.S. dollar to ensure the U.S. economy becomes more competitive against other economies in foreign trade. Now, the second phase to increase import duties has started. For oil markets, a weaker dollar has helped recent oil price trade by making oil prices cheaper in countries using other currencies while increasing oil demand in these countries.
However, Trump, with the aim of increasing U.S. exports, will also support oil exports globally. As a result, oil markets could see more competitive global oil trade in the near future. This would also have a knock-on effect on the compliance and duration of the extension to the oil cut pact between OPEC and non-OPEC participating countries.
The declining trend in OECD commercial oil inventories is set to continue, in line with the target of OPEC and non-OPEC countries. Brent oil will continue to move between $64 and $67 this week amid statements from market influencers at the CERAWeek by IHS Markit, the world's premier energy event, and based on changes in U.S. oil crude production and commercial oil inventories.
- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.