Oil Market Outlook
Oil prices were little changed last week despite an advance on Friday after new figures showed 90% compliance by Opec members with the output cuts they had agreed on earlier.
Gains were capped by the steady rise in US production to take advantage of higher crude prices. The market was also pressured by a report that crude demand in China last year rose only 2.5%, the slowest in three years. However, prices were supported by an unexpected decline in US gasoline stocks after five weeks of gains.
West Texas Intermediate (WTI) last week rose three cents to $53.86 per barrel, Brent fell 11 cents to $56.70 and Dubai crude settled lower at $53.80. Thaioil forecasts that WTI this week will move within the range of $51 and $56, while Brent will trade between $53 and $58. Prices are expected to be supported by continuing output reductions by Opec and non-Opec producers. An expected drop in US petroleum product inventories as demand recovers should also support crude prices. Among the factors expected to influence trade:
Opec will release data today on its output reductions. Reuters last week said its surveys showed 82% compliance with an agreement to reduce production by 1.2 million barrels per day (bpd). Platts put the compliance figure at 91% the International Energy Agency (IEA) said it was 90%. The figures are well above the 60% average recorded in 2009, the last time Opec reduced output to support prices. Notably Saudi Arabia appears to have cut by more than required. Meanwhile, total global oil output in January plunged by almost 1.5 million bpd, including 1 million cut from Opec.
The IEA lifted its outlook for 2017, forecasting an increase of 1.4 million bpd this year. World oil inventories will fall by 600,000 bpd during the first half of the year if Opec sticks to its agreement, it said. Opec is being joined by 11 non-members including Russia and Kazakhstan, who have implemented about half of their pledged cut of 558,000 bpd.
US gasoline stocks are decreasing amid a recovery in demand. Inventories in the week to Feb 3 bell by 870,000 barrels, against forecasts for a gain of 1.1 million, the Energy Information Administration (EIA) said. It was the first decline in five weeks. However, crude stocks remain high as imports are rising and refineries are reducing intake during maintenance season. The EIA said crude stocks to Feb 3 rose by 13.83 million barrels to 508.59 million. Stockpiles should soon begin falling and imports will slow amid output curbs by Opec and other countries, Goldman Sachs said.
US oil companies added rigs for a 14th week in the last 15, extending a nine-month recovery as drillers take advantage of higher crude prices. Drillers added eight oil rigs in the week to Feb 10, bringing the total to 591, the most since October 2015, the energy services firm Baker Hughes said. The rig count plunged from a record 1,609 in October 2014 to a six-year low of 316 in May last year as crude collapsed from over $107 a barrel in June 2014 to near $26 in February 2016.
Economic indicators to watch include euro zone fourthquarter 2016 GDP and industrial production, US retail sales and Chinese producer price and consumer prices.