Oil Market Outlook
Crude oil prices were depressed last week by production increases from Saudi Arabia and Russia, and concern about falling oil demand because of the global economic impact of the worsening US-China trade war. An unexpected rise in US crude oil stocks also affected sentiment.
However, losses were limited as investors weighed the prospect of a complete halt to Iranian oil exports as the United States warned buyers that failure to comply with its sanctions could hurt them. Production disruptions in Canada and Libya also kept a floor under prices.
West Texas Intermediate (WTI) crude fell 35 cents to close at $73.80 per barrel. Brent dropped $2.33 to $77.11 and Dubai crude averaged $74. Thaioil forecasts that WTI this week will trade between $72 and $77, and Brent between $76 and $81. Prices are expected to hold steady amid lower production in Libya and Iran, while US crude stocks are expected to fall as refineries step up activity. But rising output by both Opec and the US could limit gains. Among the factors expected to influence trade:
Oil production has plunged in Libya, with the National Oil Company (NOC) declaring force majeure on shipments from the Zueitina and Hariga ports seized by militias. The Ras Lanuf and Es Sider oil export ports also remain closed. As a result, output has declined by 850,000 barrels per day from slightly over 1 million bpd. The NOC is now seeking UN sanctions against 48 individuals and entities they accuse of trying to sell oil illicitly in a struggle over the country’s oil wealth.
Monitor the decisions of countries importing crude oil from Iran, after the US demanded that all nations halt purchases before sanctions take effect in November. Iran is currently producing about 3.8 million bpd of oil and exporting 2.5 million bpd, and its oil minister said on Saturday that output has not changed … yet.
US crude oil inventories are expected to start falling again as refinery utilization is at a seven-year high. As well, exports to the US from the 300,000-bpd Syncrude field in Canada have fallen by 92% pending completion of an upgrade at the end of this month.
Opec and its allies are beginning to increase production in line with an agreement reached at a meeting on June 22 to offset lost supply from Iran and Venezuela. Saudi Arabia plans to increase outputs to 11 million bpd this month from 10.8 million in June this year, and the UAE will add 200,000 bpd by year-end to the 3.3 million it is pumping now. Russia expects to lift output to a 16-month high of 11 million bpd. US oil production, meanwhile, is holding steady at 10.9 million bpd and is poised to reach 11 million in the current quarter, according to the Energy Information Administration. The number of working US oil rigs rose by five last week to 863.
Economic indicators to watch include Chinese and US producer and consumer prices and euro zone industrial production.