- The Writer holds听an MSc from Creighton University and is听a PHD candidate in the Turkish National Police Academy
Brent oil prices held above the $50 level having struggled to recuperate losses over the past two weeks. This rally was mostly due to the possibility that OPEC and non-OPEC members would not prolong the oil cut agreement. This possibility became evident at the Saudi Energy Ministry鈥檚 interview in IHS CERAWEEK, where it was made known that Saudi Arabia would not continue to bear most of the oil cut burden alone on behalf of other producers. 听
However, the high conformity level detailed in OPEC鈥檚 Joint Technical Committee鈥檚 (JTC) February report and with the later perception in the markets that an extension to the current oil cut deal would be likely, if required, after the Joint OPEC and non-OPEC Ministerial Monitoring Committee (JMMC) meeting the last week in March in Kuwait helped keep Brent oil over $50.
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, and the weekly U.S. Baker Hughes rig count.
Brent oil started the week with a slight fall to $50.75 due to the rise in the U.S. Baker Hughes rig count from the previous week, despite the sharp decrease in the U.S. dollar index. However, oil prices regained losses to $51.33 on Tuesday through the slight inventory rise (1.909 million barrels) compared to the previous week (4.529 million barrels) in the weekly API, despite the increase in the U.S. dollar index.
Subsequently, oil prices continued up to $52.42 through a slight rise in U.S. oil inventories (0.867 million barrels) compared to the previous week (4.954 million barrels) in the weekly EIA reports in spite of further increases in the U.S. dollar index.
Oil prices continued the surge to $52.96 despite a slight increase in the U.S. dollar index, but then regained some losses and settled at $52.83 at the end of the week due to a ten rig count rise in the U.S. Baker Hughes data.
Surprisingly, during the week, both oil prices and the U.S. dollar index fluctuated in parallel, although there was mainly a negative correlation between them. Both high conformity levels in the JMMC report and the establishment of an efficient mechanism between the 28 participating countries gave rise to the expectation that a six-month extension to the OPEC and non-OPEC oil cut deal past June was on the cards.
Another challenge to the oil trade was with the increased reliance on domestic resources from U.S. shale oil producers and with Indian domestic oil and gas exploration companies, who are attempting to cut their foreign trade deficits by bolstering their usage of domestic resources. Furthermore, according to the International Energy Agency, Brazil and Canada are also ready to boost their oil production. In addition, advanced oil and gas technology has made it easier for the realization of the many recent oil discoveries in the U.S., Alaska, and the U.K.
A strong U.S. dollar is also another advantage in extending the OPEC and non-OPEC鈥檚 oil curb deal if the participants want to keep oil prices at least over $50 aiming towards $60 while the U.S. Federal Reserve (FED) is likely to apply two more interest rate hikes in 2017 if Donald Trump does not intervene.
In brief, Brent oil prices remained over $50 and reached the $53 mark as predicted over the past two weeks. Now, another turning point again could be imminent in which prices could reach $55 through possible declines in U.S. oil inventories in both the weekly API and EIA reports, if not, a price range of between $50 and $53 is viable.听听
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- Opinions expressed in this piece are the author鈥檚 own and do not necessarily reflect Anadolu Agency's editorial policy.听
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