Oil Market Outlook
Oil prices surged last week after a drone attack on two major sites in Saudi Arabia knocked out 5.7 million barrels per day or 5% of daily global oil supply.
The gains were short-lived, as Saudi Aramco said full production would resume by the end of this month. But geopolitical tensions persist, with the US toughening sanctions against Iran, which it blames for the attack. Prices slipped back on Friday, partly in response to an unexpected rise in US crude inventories.
West Texas Intermediate (WTI) crude rose $3.24 on the week to close at $58.09 per barrel. Brent climbed $4.06 to $64.28 and Dubai crude averaged $64. Thaioil forecasts that WTI this week will trade between $56 and $61, and Brent between $62 and $67. Prices could rise as the market digests the impact of new US sanctions on Iran. As well, Tropical Storm Imelda, which dumped massive amounts of rain on the Houston area, has disrupted US oil shipments. Among the factors expected to influence trade:
Saudi Arabia has produced evidence purporting to show that Iran was behind the strike on the Aramco oil facilities, but neither Riyadh nor the US wants to take military action at this time. President Trump says he prefers to apply pressure in the form of more sanctions, this time against the Iranian central bank for its support of “terrorism”.
Some traders are betting on an uptick in oil demand as major economies respond to new stimulus from central banks. The US Federal Reserve last week cut its benchmark rate by another 25 basis points, after the European Central Bank pushed its negative rates even lower and announced more bond buying. The People’s Bank of China has also eased rules for banks in hopes of reducing loan costs for the business sector.
The oil market is also expected to gain support from US-China trade negotiations, as both sides have delayed planned tariff increases as a goodwill gesture ahead of talks in Washington next month. But investors panicked on Friday after some visiting Chinese agriculture officials abruptly cancelled trips to US farm states where they were expected to discuss purchases of more US agricultural products.
US crude inventories are likely to rise as Tropical Storm Imelda disrupts oil pipelines, refineries and terminals on the Gulf Coast. Crude stocks in the week to Sept 13 rose by 1.06 million barrels, compared with forecasts for a decline of 2.25 million.
Economic indicators to watch include US secondquarter GDP, durable goods orders and personal income, and euro-zone composite PMI.
For more information visit www.thaioilgroup.com or download the TOP Energy application for iOS or Android mobile devices.