Oil Market Outlook
Oil prices fluctuated last week as the market assessed the impact of Hurricane Sally on US crude production, while a new storm began forming in the Gulf of Mexico late in the week.
Prices were supported by a warning from Saudi Arabia to Opec+ members that had failed to meet their output-reduction quotas, but increasing concern about the impact of new Covid-related lockdowns and longer-term fuel demand kept a lid on gains.
West Texas Intermediate crude rose $3.78 on the week to close at $41.11 per barrel. Brent climbed $3.22 to $43.15 and Dubai crude averaged $43.14. Thaioil forecasts that WTI this week will trade between $38 and $43, and Brent between $40 and $45. Prices could fluctuate depending on the impact of a new storm on US offshore production. Traders will also watch for signs of improved compliance with Opec+ output cuts. Among the factors expected to influence trade:
US energy firms are keeping an eye on tropical storm Beta, just a few days after Hurricane Sally had forced the evacuation of 150 exploration platforms. More than 100 platforms had resumed some operations by Friday, but oil output was still down about 400,000 barrels per day (bpd) or 21% from normal levels.
Opec and its allies agreed on Sept 17 to maintain their output cuts at 7.7 million bpd until the end of 2020, as expected. However, Saudi Arabia is strongly pressuring countries that have overproduced to make deeper cuts to offset earlier overproduction. Abu Dhabi promptly announced it would cut November supplies by 25%. Opec’s overall compliance with the cuts in August was estimated at 97%, up from 89% in July.
The International Energy Agency cut its forecast for 2020 oil demand growth by 200,000 bpd to 91.7 million bpd, and Opec cut its prediction by 400,000 bpd, citing the slow recovery and concerns over a new Covid wave. Demand in 2019 was just over 100 million bpd.
China said its refinery run rates in August were 14 million bpd, a rise of 9.9% from the year before, due to high imports of cheap crude. But regional oil demand remains weak and China’s exports of excess petroleum products will pressure the market.
US crude inventories in the week to Sept 11 fell to their lowest since April at 496 million barrels, sliding 4.4 million barrels, compared with forecasts for a 1.3-million-barrel rise. The Energy Information Administration said the crude utilisation rate rose 4% from the previous week, suggesting improving demand.
Economic indicators to watch include euro-zone, US and UK manufacturing and services PMI updates, US jobless claims, and Bank of Japan meeting minutes.
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