Oil Market Outlook
Oil prices ended last week at a two-week high after the US and China reached a partial trade agreement and as an Iranian oil tanker was struck in the Red Sea.
Heightened tensions in Syria, where Turkey was attacking Kurdish positions, also supported the oil market, as did indications that the US Federal Reserve might make another interest-rate cut soon.
But prices were pressured after the International Energy Agency cut its global oil demand growth forecast for 2019 by 100,000 barrels to 1 million barrels per day (bpd), citing a weakening economy. As well, US crude inventories rose while production increased by 200,000 bpd to a record 12.6 million.
West Texas Intermediate (WTI) crude rose $1.89 to close at $54.70 per barrel. Brent climbed $2.14 to $60.51 and Dubai crude averaged $60.50. Thaioil forecasts that WTI this week will trade between $52 and $57, and Brent between $58 and $63. Prices are expected to gain support from eased US-China trade tensions. But prices could be pressured by higher US inventories and the return of Saudi Arabia to full production. Among the factors expected to influence trade:
The US and China hope to sign a “Phase 1” trade agreement in November, under which China will buy at least $40 billion in US farm goods and will pledge not to use currency devaluation as a weapon. Washington has called off a tariff increase that was scheduled to take effect tomorrow. The news is positive for the global economy and oil demand.
Protests over an end to fuel subsidies have intensified in Ecuador, where the state oil company has declared force majeure on exports, cutting production by 240,000 bpd or 40% of its normal output.
The deadliest anti-government protests in Iraq since the 2003 ouster of Saddam Hussein have raised concerns about possible impact on the country’s crude exports of 3.4 million bpd.
Saudi Arabia is expected to produce 9.9 million bpd of oil this month, having made a full recovery from a Sept 14 attack that briefly knocked out half its output. As a result, production in September ended up averaging just 8.5 million bpd.
US crude inventories are expected to rise further as refineries undergo maintenance. Stocks in the week to Oct 4 rose by 2.9 million barrels, a million more than forecast. Oil drillers last week added rigs for the first time in eight weeks.
Economic indicators to watch include Chinese third-quarter GDP, industrial production and consumer prices, and US retail sales and jobless claims.