- The Writer holds an MSc from Creighton University and is a Ph.D. candidate in the Turkish National Police Academy
Brent oil sustained over $53 per barrel signaling well for prices in the future but failed to reach over $55. Doubtless to say the ongoing loss in value of the U.S. dollar has largely supported oil price increases along with the rebound in demand as refineries resume their activities having been shut down due to the devastating Hurricane Harvey in and around Texas. A decline in the U.S. oil rig count and the sharp fall in U.S. crude oil production that could be temporary due to Harvey were also supportive developments. However, the nine consecutive weeks of declines in U.S. oil inventories have now come to an end. In addition, the spread between Brent and WTI price reached over $6 last week.聽
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 price began the week with a slight drop to $52.34 with a steady oil rig count that saw no further declines as reported in the U.S. Baker Hughes data from the previous week. On Tuesday, the price increased to $53.38 through the decrease in the U.S. dollar index.
It surged to $54.20 on Wednesday through an increase in demand with the restart of oil refineries in the U.S after Hurricane Harvey, despite a weekly rise of 2.79 million barrels in U.S. oil inventories as detailed in the weekly API report.
It continued its ascent to $54.49 through a sharp decline in the U.S. dollar index and a big fall in U.S. crude oil production of 750 thousand barrels per day to 8.78 million barrels per day for the week ending Sep.1, as reported by the U.S.鈥� weekly EIA crude oil production report. This prices increase was despite a rise of 4.58 million barrels in U.S. commercial oil inventories, according to the Energy Information Administration鈥檚 (EIA) weekly report.聽
However, it dropped and settled at $53.78 at the end of the week due possibly to low demand caused by Hurricane Irma despite a three-oil rig count decline as per Baker Hughes data and a decrease in the U.S. dollar index.
In brief, last week Brent oil climbed to $53.75 from $52.75 mainly due to the sharp fall in the U.S. dollar index.
Although both oil benchmarks increased last week, Brent oil rose more than WTI with a spread of over $6 because of low oil demand caused by both hurricanes, Harvey and Irma. These recent natural catastrophes damaged the U.S.鈥� oil sector with WTI not benefitting as much as Brent from the weak dollar. However, the spread could tighten after the oil sector recovers from the storm damage.聽聽
In the U.S. dollar index continues to lose value against major currencies. There have been many notable political disputes in Trump鈥檚 administration since his inauguration frequently resulting in resignations of his team and the escalation of geopolitical risks with the U.S.鈥� rhetoric following the latest nuclear test by North Korea. Accordingly, trade in other currencies has been chosen over the U.S. dollar causing a downgrade in the greenback.
Regardless, it seems that Trump is continuing his aim to create a more competitive trading environment for U.S. companies.聽 If successful, the U.S. would be able to reduce its foreign deficit, support oil prices and accordingly the oil and gas sector in the U.S.
This week, Brent oil could reach over $55 if further drops in the U.S. oil
inventories and declines in crude oil production occur, amid a weaker U.S. dollar index. If not, declines towards $53 are likely.
- Opinions expressed in this piece are the author鈥檚 own and do not necessarily reflect Anadolu Agency's editorial policy.