Oil Market Outlook
Oil prices remained under pressure as the rising number of US oil rigs threatened to worsen a global supply glut. Higher than expected US inventories and an increase in exports by Iraq, now Opec’s second largest exporter, also weakened sentiment.
Prices rallied slightly on Friday as weak US GDP data pushed down the dollar and bolstered investor appetite for commodities. However, West Texas Intermediate (WTI) crude is still down 14% since July 1.
The price of WTI last week dropped by $2.59 per barrel to close at $41.60. Brent fell $3.23 to $42.46 and Dubai crude averaged $39. Thaioil forecasts that WTI this week will move within the range of $39 and $44 while Brent will trade between $40 and $45. Prices will continue to be depressed by the oversupply and a possible recovery of the dollar. However, concerns about production in Libya could limit losses. Among the factors expected to influence trade:
US crude inventories rose against analysts’ predictions of a decline after refinery run rates fell and crude oil imports increased. The Energy Information Administration reported a gain in the week to July 22 of 1.1 million barrels, the highest since May, to 521.1 million barrels. Gasoline inventories rose by 500,000 barrels to 241.5 million, surprising analysts given that this is the peak of the US summer driving season.
US drillers added oil rigs for a fifth consecutive week as part of the biggest monthly increase in over two years, according to the oilfield services firm Baker Hughes. Three rigs were added in the week to July 29, bringing the total to 374, compared with 664 a year ago. Drillers began stepping up activity after oil prices edged above $50 in June. Baker Hughes analysts have cautioned that a price closer to $60 would be needed for a sustainable recovery in North America.
The US dollar is expected to appreciate again now that the Federal Reserve has signalled it may raise interest rates later this year. Fed officials now appear less concerned about the impact of global events on the US economy, but domestic economic indicators remain mixed. There are three more Fed meetings scheduled this year: in September, November and December. A move in November, just one week before the presidential election, has been ruled out, leaving September or December as possibilities.
Libya will attempt to reopen the Es-Sider and Ras Lanuf export ports after reaching a pay deal with rebel militiabacked guards at the sites. However, the timing is uncertain and further protests are looming, this time against a proposed merger of two national oil companies. Libya hopes to restore oil production to 700,000 bpd, still well short of pre-2011 levels of 1.6 million bpd, by the end of this year if the ports can resume normal operation.
Economic indicators to watch include Chinese Caixin PMI, euro zone PMI, US retail sales, services PMI, nonfarm payrolls and unemployment data.