Oil Market Outlook
Oil prices continue to be depressed by reports of record high crude stocks and steadily increasing production, now at a two-year high of 9.13 million barrels per day, in the United States.
However, losses were limited by the output cuts of Opec members, who are now debating whether to extend the reductions beyond June, if they receive cooperation from non-Opec members including Russia.
The price of West Texas Intermediate (WTI) crude fell by 89 cents to close last Friday at $47.97 per barrel. Brent shed 90 cents to $50 and Dubai crude averaged $49. Thaioil forecasts that WTI this week will move within the range of $47 and $52, while Brent will trade between $49 and $54. Prices are expected to be stable as rising US output cancels out the benefits of cuts by Opec and others. A pickup in Libyan crude production following recent conflicts could also keep a lid on any gains. Among the factors expected to influence trade:
The market this week will react to the results of Sunday’s meeting in Kuwait between Opec and non-Opec producers, though most agree that a final decision on whether to extend their agreement past June will not be made until late April at the earliest. Saudi Oil Minister Khalid al-Falih said last week that an extension was possible if global crude oil stocks remained higher than the five-year average. Russian producers are now reported to favour an extension as recent oil price increases have compensated for lost income earlier. Opec achieved 91% of its pledged cuts last month, while Russia and others delivered about 44%, according to the International Energy Agency.
High US crude inventories continue to be a drag on the market, with the Energy Information Administration (EIA) reporting that stocks in the week ending March 17 climbed by 5 million barrels to 533.1 million, mainly on high imports.
The rise in US output by 150,000 bpd in the past five weeks reflects a steady increase in new oil rigs. Drillers added 21 rigs in the week to March 24, bringing the total to 652, the energy services firm Baker Hughes said. Production rose by 20,000 bpd to 9.13 million. The EIA now forecasts output will average 9.2 million bpd for the full year and 9.6 million bpd in 2018.
Canada’s oil sands industry has received a boost from US approval of a construction permit for the Keystone XL pipeline from Alberta to the American Midwest. Opec’s supply cuts are providing a windfall for producers of heavy crude from western Canada and the Gulf of Mexico.
Libyan oil production is recovering as tensions in the eastern part of the country ease. Output is now 700,000 barrels a day and state-run National Oil Corp is aiming for 800,000 bpd by the end of April. Production could rise by as much as 125,000 bpd as work resumes at the Abu Attifel and Rimal oil fields after maintenance, and the El Sharara field resumes production after recent fighting.
Economic indicators to watch include final 2016 GDP figures in the US, euro zone consumer prices, US personal income data and Chinese manufacturing PMI.