Oil Market Outlook
Oil prices were depressed for most of last week by uncertainty about the prospects for talks next month about stabilising the market. Iran appears ready to talk but Iraq, Nigeria and Libya are still trying to increase capacity and oppose a freeze at this time. Rising US inventories also pressured the market.
However, prices rallied in New York on Friday as the dollar retreated after US Federal Reserve Chair Janet Yellen said the pace of US interest-rate increases would be gradual.
West Texas Intermediate dropped last week by 88 cents per barrel to close at $47.64. Brent fell 96 cents to $49.92 and Dubai crude averaged at $45.80. Thaioil forecasts that WTI will move this week within the range of $44 and $49, while Brent will trade between $46 and $51. The market will monitor supply data, attempts to ease unrest in Nigeria, and developments related to the planned Opec talks. Among the factors expected to influence trade:
The persistence of the oversupply was underlined by US Energy Information Agency figures showing that crude oil inventories in the week to Aug 19 rose 2.5 million barrels to 523.6 million, against forecasts of a decline. Gasoline inventories also rose 36,000 barrels. However, US production fell by 49,000 bpd to 8.55 million.
There are hopeful signs in Nigeria after the Niger Delta Avengers (NDA) said it was ready to negotiate with the government. However, the NDA is divided into several small groups and it is not clear who will take part in talks. NDA attacks on pipelines and oil facilities have cut the country’s output by 700,000 bpd to 1.56 million bpd. Meanwhile, the government is struggling to find the money to restore damaged oil infrastructure.
The US oil rig count was unchanged in the week to Aug 26 after eight weeks of increases, although analysts expect the count to keep rising as long as crude prices stay above $45-50. A total of 406 oil rigs are now active, compared with 675 a year ago, the energy services firm Baker Hughes said. The figure has risen by 76 since the week ended July 1, the most since mid-2014 when crude was trading near $100 a barrel.
Opec members continue to stake out their positions as they prepare for informal talks on the sidelines of an industry conference in Algeria on Sept 26-28. Iranian Oil Minister Bijan Namdar Zanganeh said his country would help other producers stabilise the world market so long as fellow Opec members recognise its right to regain lost market share. Tehran insists it will be ready for joint action only once it regains pre-sanctions output of 4 million bpd. It pumped 3.6 million bpd in July, Opec figures show. Iraq, meanwhile, remains opposed to any output freeze.
Economic indicators to watch include revised secondquarter US GDP, euro zone unemployment rate, consumer and producer prices and manufacturing PMI; US employment data, and Chinese NBS manufacturing PMI.