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- The Writer holds an MSc from Creighton University and is a PHD candidate in the Turkish National Police Academy

Oil prices have recently appeared steady at around $55 for Brent and $53 for West Texas Intermediate (WTI), amid attempts to reach a new balance range of between $53 and $60. Trump’s inauguration has helped stability in oil prices through the U.S. dollar index over the past weeks. Furthermore, the U.S growth rate in fourth quarter of 2016 was lower than expected, which means that the U.S dollar index could further weaken. On the other hand, BP’s last outlook does not seem very optimistic on the demand side. Meanwhile, Trump is continuing his protectionist policy as promised in his election campaign with the immigration ban from selected Muslim countries, which could result in the breakdown in relations between the U.S and major oil exporting countries. 

Oil markets last week will be reviewed based on the U.S. dollar index, weekly American Petroleum Institute (API) and Energy Information Administration (EIA) crude oil inventories, weekly U.S. Baker Hughes rig count as well as speculations during the week.

Brent oil started the week with a slight fall to $55.23 due to rise in the U.S. Baker Hughes rig count from the previous week despite the decrease in the U.S dollar index. It subsequently regained its losses to $55.44 through weak U.S dollar before the announcement of weekly API and EIA crude oil inventory reports. However, prices dropped to $55.08 based on these reports, which revealed increases in oil stocks in the U.S. in spite of the lowering in the U.S dollar index.

Later, oil prices surged to $56.24 with optimism expressed by oil traders for higher oil prices in 2017. However, the price settled at $55.52 at the end of the week due to the rise in the U.S dollar index and U.S Baker Hughes rig count.

In brief, oil prices moved in a narrow range during the week, leaving the closing price last week to be similar to the previous week at $55.49. Furthermore,  the U.S. dollar index at closing was 100.53 � a similar range to 100.69 of the previous week. The correlation in the U.S. dollar index and oil prices during the week is significant.    

The U.S dollar index started to weaken after Donald Trump’s inauguration, and continued to fluctuate around 100. The U.S. growth rate published last Friday was lower than expected, which could result in fewer interest rate hikes in 2017 than the Fed’s prediction. The lower growth rate could also support the further weakening of the U.S. dollar index.    

Trump’s immigration ban is in danger of straining U.S.-Iran relations that could trigger a reciprocal ban of U.S. citizens to Iran. If relations break down, the reissuing of sanctions on Iran could become a greater possibility causing reductions to Iran’s oil exports.  This in turn could quickly boost oil prices.

On the demand side, BP’s Energy Outlook 2017 shows that the oil demand growth will slow. Such sluggish growth is likely to be seen in the petrochemical sector up to 2030s as oil use in the transport sector could fall off due to the rising use of electric cars. The report also underlines the importance of emerging markets like China for oil demand growth.

Oil prices were steady and ranged between $53 and $60 and are prone to continue at around $55 in the short term. However, changes in the U.S. dollar index are still very likely to influence fluctuations.

- Opinions expressed in this piece are the author’s own and do not necessarily reflect Anadolu Agency's editorial policy.