Oil Market Outlook
Oil prices moved up last week despite a sharp drop on Friday when disappointing economic data stoked new fears of slowing global growth and weaker oil demand.
Prices had gained support earlier from data showing lower Saudi production and exports, as Opec’s biggest producer continues to lead the movement to rein in production. US crude oil and petroleum product inventories have also fallen for two consecutive weeks.
But investors are growing more concerned about the global economy, in light of weak industrial data in Europe and a report showing that Chinese industrial output in January and February rose just 5.3%, the smallest increase in 17 years. The US Federal Reserve has acknowledged the concern as well, saying it won’t raise interest rates this year.
West Texas Intermediate (WTI) crude rose 52 cents on the week to close at $59.04 per barrel. Brent climbed 14 cents to $67.03 and Dubai crude averaged $67.50. Thaioil forecasts that WTI this week will trade between $56 and $61, and Brent between $64 and $69. Prices are expected to hold steady due to Opec cuts and falling US stockpiles. But investors will be watching economic data and also awaiting a US decision on whether to extend waivers from sanctions for some customers of Iranian oil. The current waivers expire on May 4. Among the factors expected to influence trade:
Global crude supply is likely to keep dropping. Saudi Arabia said its output in February fell to 10.13 million bpd and would fall below 10 million this month and next, a bigger cut than it had pledged. Saudi exports fell to 7.3 million bpd in January from 7.7 million in December. Russia is also expected to cut production by 88,000 bpd to comply with its commitment.
US crude stockpiles in the week to March 15 fell by 9.6 million barrels, the most since July, boosted by strong export and refining demand, the Energy Information Administration said. Exports have reached an all-time high of 3.39 million bpd. Inventories are now at 440 million barrels, still above the five-year average.
Washington is likely to extend waivers from sanctions for certain countries importing Iranian crude, such as China and India, in order to prevent an oil price spike that could hurt the economy. But the amounts exempt from penalties might be reduced.
US-China trade talks have stalled amid US demands for further reforms by Beijing. A summit between the two countries’ leaders is not expected until late April.
Economic indicators to watch include euro-zone business sentiment and consumer prices, and US trade, jobless claims and housing starts.
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