Oil Market Outlook

Oil prices fell last week as US-China trade tensions worsened and signs of a global economic slowdown increased, while US crude inventories increased unexpectedly and Libya’s largest oilfield resumed production.

However, the market rallied on Friday after Saudi Arabia announced a plan to cut exports in September to prop up prices. Tensions in the Persian Gulf also supported prices, as did a sixth consecutive weekly drop in the US oil rig count.

West Texas Intermediate (WTI) crude fell $1.16 to $54.50 per barrel. Brent shed $3.36 to $58.53 and Dubai crude averaged $57. Thaioil forecasts that WTI this week will trade between $52 and $57, and Brent between $56 and $61. Prices are expected to fall amid signs of slower oil demand growth, but lower Opec output and Mideast tensions could support the market. Among the factors expected to influence trade:

President Trump has cast more doubt on chances for a trade deal with China, signalling he might cancel talks set for September. The comments came after Beijing allowed the yuan to weaken below 7 to the dollar, drawing accusations of manipulation from Washington. China has also halted purchases of US agricultural products as it braces for 10% US tariffs on another $300 billion of its exports on Sept 1.

US crude inventories are expected to rise as production in the Gulf of Mexico is back at full capacity, while refinery run rates remain high at 96%. Crude stocks in the week to Aug 2 rose unexpectedly by 2.4 million barrels, reaching 439 million. Exports fell to a 10-month low of 1.9 million bpd.

Crude supply from Opec producers is likely to remain stable or drop as a result of coordinated efforts to reduce output, as well as US sanctions on Venezuela and Iran. Opec oil output in July dropped by around 280,000 bpd from June to an eight-year low of 29.42 million. Iranian crude exports in July were 2.4 million bpd, 100,000 lower than in April. Meanwhile, Saudi Arabia said it would reduce exports to below 7 million bpd next month, allocating about 700,000 bpd less than it had planned earlier to customers around the world.

Tension in the Middle East has caused higher risks for oil transport through the Strait of Hormuz. Last week, Iran seized an Iraqi tanker in the Persian Gulf, claiming it was smuggling fuel to some Arab countries, while the US and the UK are cooperating to protect ships travelling through the Strait of Hormuz.

Economic indicators to watch include euro zone second-quarter GDP, US consumer prices, retail sales and consumer confidence.

For more information visit www.thaioilgroup.com or download the TOP Energy application for iOS or Android mobile devices.