​Last week, crude oil prices held steady trading between $56/bbl and $54/bbl. Oil prices were highly likely to rise last week, however pressure from strong US dollar, uptick in US crude oil stockpiles and headlines about potential increase in Libya’s oil output weighed on oil prices throughout the week.
Another reason for steady oil prices last week is the light trading due to holiday season and the fact that the oil market is currently in a wait-and-see state on how OPEC would manage its planned output cuts. The high optimism due to OPECÂ is now fading away and the oil market is now back to reality. Investors and traders are now focused on the actions of OPEC and non-OPEC members on cutting their oil output as agreed more than anything else.Â
Brent Crude Oil Price
Oil prices started last week slightly up around $55/bbl before falling down to around $54/bbl on Tuesday and Wednesday on an unexpected rise in US crude oil inventories. However, on Thursday and Friday, oil prices were up despite the increase in US rig count reported by Baker Hughes. Brent crude and WTI ended the week around $55/bbl and $53/bbl respectively.
Last Week Oil Market Data and News
According to the Energy Information Administration (EIA)‘s Weekly Petroleum Status Report, last week US crude oil stockpiles increased by 2.3 million barrel to 483.4 million barrel. The rise in US inventories last week weighed on oil prices as it was higher than what was expected earlier in the week.
US rig count also increased last week by 16 rigs according to Baker Hughes rig count service. Around 13 of these rigs were oil rigs bringing the number of US oil rigs count to 523 rigs. Gas rigs were also up by 3 rigs to 129. The increase in rig count is a direct result of the rise and sustainability of oil prices above $50/bbl. Although the rise in rig count is a measure of the improvement in oil and gas industry activities, in the current scenario, it is also a measure of the threat to the sustainability of oil prices above $50/bbl.
Adding to the downward pressure, news about restored Libyan oil supply weighed on oil prices last week. According to the country’s National Oil Company, Libya -an OPEC member which is exempt from any production cuts- managed to restore long closed pipelines. Once these pipelines are in operation in the next few months, it could deliver around 270,000 barrel per day.Â
Last week, Libya also managed to start operation in Es Sider port which loaded its first cargo after two years of no-operation on Monday. The reopening of this port could help Libya achieve its target of increasing its oil output to 900,000 bpd by early next year as the port has a capacity to export more than 350,000 barrel per day.Â
On the other hand, the Weekly U.S. Field Production of Crude Oil data published by the EIA showed that US crude oil production decreased by 10,000 barrel per day to the week ending December 16. Despite the fact that the decline is quite small, it gave some support to oil prices especially as US crude oil production is expected to rise as a result of ramping up drilling and production activities in the United States aimed high oil prices.
This Week Oil Price Forecast:
Crude oil prices will remain stable this week with a small range of fluctuation around their current levels. Driven by the current state of the oil market which is focused more on how OPEC will manage to cut its oil output and the fact that there is no major headlines from last week, Brent crude and WTI could fluctuate by 1 percent around their current levels of $55/bbl and $53/bbl respectively.Â
Oil Price Forecast for This Week
Downward pressure to oil prices this week will come from fears over of the return of Libyan supply to the oil market, strengthening US dollar, rising US rig count and a possible increase in US stockpiles and oil production this week. However, the negative impact of these events on oil prices will be minimal as the focus of the oil market right now is on how OPEC will achieve its production cut target. The answer to whether OPEC will succeed in achieving its output cuts or not will determine the direction of oil prices in the short to medium term.Â
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Remark: The expectation of oil prices’ direction in this commentary are based on the oil market data and news up until the time of writing this commentary. As the week starts, new data and news are reported and could influence oil prices differently. Therefore, the direction of oil prices cloud be different from what was expected here. It is important to stay updated with oil market data and events as they occur.
