Oil Market Outlook
Oil prices plunged last week on fears of an oversupply after the United States granted waivers from sanctions to eight countries that import Iranian crude. Prices were also depressed by rising US production and inventories.
With West Texas Intermediate (WTI) hovering around $60 a barrel and Brent briefly dipping below $70, oil has entered a bear market, with prices down more than 20% from a four-year high reached in early October.
The declines came as Opec and its allies were gathering for a weekend meeting in Dubai, where production cuts were expected to be the main topic.
WTI prices fell $2.95 to close at $60.19 per barrel. Brent sank $2.65 to $70.18 and Dubai crude averaged $70. Thaioil forecasts that WTI this week will trade between $58 and $63, and Brent between $68 and $73. Prices are expected to be pressured by concerns about demand growth as more signs emerge of a slowing world economy. Higher US output and inventories will add to the pressure. And while sanctions against Iran have yet to have a major impact, Washington insists the country’s oil exports will fall to zero eventually. Among the factors expected to influence trade:
The market is monitoring purchases from Iran by the eight countries granted waivers from US sanctions. They include China, Japan and South Korea, mainly because President Donald Trump is seeking their political support in other areas. US officials also were said to be concerned that making the sanctions too tough would risk causing a spike in world oil prices. The eight countries have been given 180 days to gradually reduce their imports of Iranian oil.
Iranian crude oil exports are down 40% since April, to about 1.5 million bpd, but might not fall much further in the near term. India, China and South Korea, three of Asia’s top four buyers, have waivers allowing them to purchase a combined 860,000 bpd. Tehran has also been trying to persuade European countries to resist US threats. Turkey, meanwhile, continues to buy natural gas from Iran.
US crude oil inventories are expected to keep rising in line with record-high production that has reached 11.6 million bpd, up 22.2% since January. The Energy Information Administration has increased its 2019 output forecast by 300,000 bpd to 12.06 million. US crude inventories in the week to Nov 2 rose by 5.8 million barrels, to 431.79 million, against forecasts for a gain of just 2 million.
Russian crude production has also risen to 11.41 million barrels per day, the highest level since the fall of the Soviet Union in 1991. And Opec output in October rose by 390,000 bpd to 33.31 million, which is a two-year high.
Investors will monitor developments in the run-up to the G20 summit later this month in Argentina, where US President Donald Trump and Chinese President Xi Jinping are expected to discuss ways to solve a trade dispute that has become a drag on economic and investment sentiment.
Economic indicators to watch include Chinese and US retail sales and euro zone third-quarter GDP.
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