Oil Market Outlook
Oil prices plunged last week to their lowest in 13 months on growing worries about an oversupply and weaker demand in a slowing world economy. Although Opec is expected to agree next month to curb output by at least 1 million barrels per day, a steadily rising US oil supply is contributing to a global surplus. As well, US crude inventories climbed for a ninth consecutive week.
Weak economic data from Europe has also dimmed oil market sentiment as surveys show business growth slowing. US stocks also sank in response to disappointing earnings, while many companies are signalling slower growth in the year ahead as rising interest rates push up their costs.
West Texas Intermediate (WTI) crude fell $6.04 to close at $50.42 per barrel. Brent slid $7.96 to $58.80 and Dubai crude averaged $61. Thaioil forecasts that WTI this week will trade between $49 and $54, and Brent between $55 and $60. Prices are expected to swing in response to any signals from Opec and its allies about plans for production cuts, or indications that US sanctions are beginning to cut exports from Iran. Among the factors expected to influence trade:
Opec members will meet on Dec 6 in Vienna, but their plans may become clearer before then. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman are expected to discuss oil when they meet at the G20 summit in Buenos Aires on Nov 30.
Opec and non-Opec producers have talked informally about cutting production next year by as much as 1.4 million barrels per day from October levels in order to balance the market. Much will depend on the willingness of Saudi Arabia to take the lead at a time when US President Donald Trump is pressuring Riyadh to help push oil prices even lower.
Iran’s crude oil exports for November are expected to decline, but by less than forecast because the US has granted waivers from sanctions to eight countries that buy Iranian crude. In the past two weeks, no oil has been exported from Iran, as buyers had locked in advanced purchase agreements before the waivers were announced. However, South Korea and Japan are among those planning to resume imports from Iran in January. The US, Russia and Saudi Arabia earlier raised production to compensate for what they believed would be a steel drop in supplies from Iran, but now the market is in danger of being oversupplied.
US crude oil inventories are expected to start declining after a sharp run-up in recent weeks, as refineries step up production of heating fuel. Inventories in the week to Nov 16 rose by 4.85 million barrels to 447 million, which is 27 million barrels above the five-year average.
US production remains at a record 11.7 million barrels per day, the highest in the world, and is expected to average 11.66 million bpd in December, according to the Energy Information Administration. But the number of active US oil rigs fell last week by three in response to the recent fall in prices.
Economic indicators to watch include revised US thirdquarter GDP and personal spending, euro zone unemployment rate and consumer prices.
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