Oil Market Outlook
Oil prices last week posted their biggest weekly gain since late July as Texas refineries recovering from Hurricane Harvey processed more crude and global demand forecasts brightened.
Sentiment was also buoyed by the possibility that Opec and non-Opec producers would extend their production cuts of 1.8 million barrels per day beyond March, with Saudi Arabia and Russia appearing to support the idea.
However, gains were capped by an increase in US crude inventories — the first in 10 weeks — that was even higher than analysts had forecast as post-Harvey refinery activity remained limited.
West Texas Intermediate (WTI) crude increased by $2.41 to close at $48.89 per barrel. Brent gained $1.84 to $55.62 and Dubai crude averaged $53.50. Thaioil forecasts that WTI this week will move within the range of $48 and $53, while Brent will trade between $52 and $57. Prices are expected to be steady, as US crude stocks should fall as refineries recover. However, any gains could be limited by steppedup production from the Gulf of Mexico. Among the factors expected to influence trade:
The largest US refinery, operated by Motiva Enterprises in Port Arthur, Texas with a capacity of 603,000 barrels per day, has resumed operation, which should lift demand for crude over the next few weeks and send stockpiles down again. Crude inventories in the week to Sept 8 rose by 5.9 million barrels to 468.2 million, reflecting weak post-Harvey demand, the Energy Information Administration (EIA) said. Nearly a quarter of US refining capacity was shuttered in the wake of Harvey, but only three Gulf Coast refineries remained closed as of last Friday.
The global crude oversupply is expected to ease amid growth in demand and the impact of Opec-led production cuts. Commercial stocks in OECD countries have declined to 3,016 million barrels, just 190 million above the five-year average. The International Energy Agency (IEA) last week increased its forecast for world oil demand this year by 100,000 bpd to 1.6 million.
US crude oil production is on the rise again as Gulf of Mexico rigs shuttered by Harvey resume work. Output in the week to Sept 8 rose by 572,000 bpd to 9.35 million, the EIA reported. However, the US rig count fell for the fourth time in five weeks, declining by seven to 749, with drops in the Permian and Eagle Ford shale basins in Texas.
Opec and non-Opec producers will meet on Thursday to discuss a possible extension of their curbs. Kuwait’s oil minister said more non-Opec producers are being approached, namely Colombia, Uganda and South Sudan. Opec producers improved their compliance to 82% of agreed cuts in August from 75% in July, while non-Opec compliance was 119% of the roughly 600,000 bpd they have agreed to take off the market.
Economic indicators to watch include US and euro zone manufacturing and consumption indices, and euro zone consumer prices.