Oil Market Outlook
Crude oil prices fell last week as US gasoline futures declined more than 2% and US gasoline inventories rose by more than 3 million barrels against a forecast of no change. At the same time, crude inventories at Cushing, Oklahoma, rose above 50 million barrels, considered a very high level.
The oil market also reacted to developments at the Federal Reserve, where both the minutes of the last Fed meeting and testimony by Chairman Ben Bernanke indicated that the Fed’s huge asset purchases may be scaled back as the economic recovery is starting to find a sounder footing.
West Texas Intermediate crude declined $1.87 per barrel to close at $94.15 last Friday while Brent crude decreased $2.00 to $102.64. Dubai crude also fell $2.00 to close at $98 per barrel.
Thaioil expects crude prices this week to move in a lower range. Brent is expected to move in the range between $98 and $106 per barrel and WTI in the range of $90 and $98.
Price declines from the end of last week are expected in response to news that the United States might end its quantitative easing (QE) stimulus policy prematurely, which might affect US oil demand. Markets ill also keep an eye on the Opec meeting to see whether members will back a decrease in oil production quotas. However, continuing unrest in the Middle East and uncertainties before the Iranian presidential election will continue to be factors keeping crude oil prices from declining very much. Key factors affecting oil prices this week:
The markets will seek further clarity about QE after Federal Reserve Chairman Ben Bernanke hinted last week that the bond buying plan might end earlier than thought. Previously the Fed had affirmed that QE would continue until the US unemployment rate, now 7.3%, came down to 6.5%. Investors are concerned that without continuing stimulus, the US economy might slow down and affect oil demand by the world’s largest oil consumer.
Opec members will meet in Vienna on Friday but they are not expected to reduce oil production quotas from the current level of 30 million barrels per day, even though non-Opec output this year is expected to rise by around 1 million barrels to 54 million bpd. However, keep a close watch on Opec if oil falls below $100 per barrel, the price members believe is fair for both consumers and producers.
Political developments in Iran bear watching in the run-up to the June 14 presidential election after two potential candidates — former president Akbar Hashemi Rafsanjani and Esfandiar Rahim Mashaie, a close aide to the current president — were barred from running. Most of the remaining eight candidates are conservative loyalists close to Supreme Leader Ayatollah Ali Khamenei, and will continue supporting nuclear development.
Unrest in the Middle East, especially conflict in Kurdish territories disputing oil rights with Iraq, could have a bearing on the market, as will the clashes in Syria. The United States, England and Russia have urged Syria to send a representative to a meeting expected to be held in Geneva in June to discuss ways to end the violence.
Key economic figures due this week include US first-quarter GDP (second estimate), pending home sales, consumer confidence, Chicago Manufacturing PMI and economic sentiment; euro zone economic indicators, consumer prices and consumer confidence; and Chinese official manufacturing PMI.